Conversation Starter - Looking Ahead
Outrageous Predictions - Saxo Bank
This is a “Black Swan Exercise,” inspired by Nassim Nicholas Taleb, the Lebanese philosophical essayist, produced each year as a forward-looking thought piece for Saxo Bank’s clients. In the book, The Black Swan: The Impact of the Highly Improbable, Taleb stresses that a Black Swan event is a highly improbable event with three principal characteristics: It is unpredictable; it carries massive impact; and, after the fact, an explanation is discussed that makes it appear less random, and more predictable, than it was. Saxo Bank’s 10 Outrageous Predictions might be useful to stress test a portfolio or to think about a far out-of-the-money option. Readers should also note that this is not an entirely scientific exercise, and the predictions are not designed to be anything of the sort. In past years, Saxo Bank has been right four out of 10 times.
See the entire Saxo Bank report here.
***An interesting little factoid here, Kim Fournais, who founded Saxo Bank along with Lars Christensen, owns the Danish island of Vejroe.
Lead Stories
Holiday Shopping Trends Could Bring Cheer to Fed
By Kathleen Madigan, WSJ.com
Much has been made of how the better holiday sales are lifting U.S. economic growth. Retail trends, however, are also playing a role in inflation for this quarter — possibly helping the Federal Reserve achieve its policy goals.
http://jlne.ws/herduu
Federal Reserve Places 70% Per-Security Limit on Treasury Debt Holdings
By Liz Capo McCormick, Bloomberg
The Federal Reserve said it will limit its purchases to 70 percent of any single Treasury security as part of its plan to expand its balance sheet that’s known as quantitative easing.
http://jlne.ws/dYszcc
Roubini, others call for U.S. mortgage standards
By Corbett B. Daly, Reuters
A group of investors and prominent academics on Tuesday urged the creation of national standards for U.S. residential mortgages to help borrowers who are having trouble getting home loans.
http://jlne.ws/dV9zaH
Bloomberg Sues ECB to Force Disclosure of How Greece's Swaps Hid Deficit
By Elisa Martinuzzi and Alan Katz, Bloomberg
Bloomberg News filed a lawsuit against the European Central Bank, seeking the disclosure of documents showing how Greece used derivatives to hide its fiscal deficit and helped trigger the region’s sovereign debt crisis.
http://jlne.ws/i1xxKy
**CN: As a side note, Bloomberg was the first to get the scoop on this one.
Americans now use debit cards for more noncash payments than any other means
Press Release - Board of Governors, Federal Reserve System
The Federal Reserve's 2010 study of noncash payments released today revealed that in 2009 more than three-quarters of all U.S. noncash payments were made electronically, a 9.3 percent annual increase since the Federal Reserve's last study in 2007. This growth and other statistics in the study emphasize consumers' increasing adoption of electronic alternatives for payments in the United States. The 2007 study revealed that in 2006 roughly two-thirds of the payments were made electronically.
http://jlne.ws/h0bbt2
Bond Market Rejects Fed's Unconditional Love: Caroline Baum
By Caroline Baum, Bloomberg
How’s that QE2 working out for you? To answer the question, we first have to establish the goals of a second round of quantitative easing as laid out by Federal Reserve Chairman Ben Bernanke. The Fed’s purchases of U.S. Treasuries “affect the economy primarily by lowering interest rates on securities of longer maturities,” Bernanke explained in a Nov. 19 speech in Frankfurt. Lower rates equate to more “accommodative financial conditions,” he said.
http://jlne.ws/gppYua
How investment banks shape up after crisis
By Megan Murphy, Justin Baer, Francesco Guerrera, Patrick Jenkins, Jeremy Grant, Martin Arnold and Sam Jones -
Financial Times
In the past decade the investment banking world was hit by a virus. Known as "Goldman envy", it prompted the likes of Morgan Stanley, Merrill Lynch and UBS - and the now-defunct Lehman Brothers and Bear Stearns - to ratchet up risks to try to replicate Goldman Sachs' strong profit growth.
http://jlne.ws/h8gtxm
Meredith Whitney On 60 Minutes: Muni Bond Troubles Ahead
By Scott Rubin, Benzinga
Noted Wall Street analyst Meredith Whitney appeared on 60 Minutes on Sunday night and voiced an ominous outlook for the municipal bond market. She said that states' fiscal problems may cause a "spate" of defaults among
municipalities.
http://jlne.ws/fkwV08
Ernst And Young Said to Face Fraud Lawsuit Over Lehman Audits
By Karen Freifeld and Linda Sandler, Bloomberg
Ernst And Young LLP will be sued for fraud by New York Attorney General Andrew Cuomo for allegedly helping Lehman Brothers Holdings Inc. mislead investors, according to a person familiar with the matter.
http://jlne.ws/gTXYiT
U.S. Treasury Department Statement On House Passage Of Tax Cut, Unemployment Insurance Package
Press Release
The U.S. Department of the Treasury today released the following statement from Treasury Secretary Tim Geithner regarding the passage of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 by the House of Representatives...
http://jlne.ws/cxgbC7
New York Fed purchases $1.619 billion in TIPS: New York Fed purchases $1.619 billion in TIPS
Federal Reserve Bank of New York. The purchase or sale of Treasury securities on an outright basis adds or drains reserves available in the banking system.
http://bit.ly/dU6jwB
Events
Introduction to Treasury Futures: Factoring the Risks, New York
When: January 13, 2011
Where: New York
Who: Institute for Financial Markets
Full Info: www.theifm.org
Details: Treasury futures are one of the most popular futures contracts for both hedging and speculating. Some of the factors that influence value in the treasury complex include: interest rate risk, inflation risk, and the willingness of investors to continue buying Treasury debt. These factors lead to volatility in the underlying value of debt instruments as interest rates move up or down. If your business borrows money, you can mitigate the effects of higher or lower interest rates by trading the treasury future complex. Moreover, with treasury interest rate levels at multi-generational lows, a robust case can be made for hedging the threat of higher interest rates in the future now -before interest rates return to 'normal' levels. This IFM short course provides the foundation to understand how the cash and futures markets are connected, and how to guard against interest rate volatility.
The 36th Annual International Futures Industry Conference
When: March 15-18, 2011
Who: FIA
Where: Boca Raton Resort & Club
Full info: http://campaign.r20.constantcontact.com/render?llr=fwgtyucab&v=001WeBrwlP3VB1EJrvzuxUwxDg8fsg1Z8ZYjylTYIAfiEPOHumaM4PToYW-FxqnOsfyAaSlhRYAWrgj0P8-SYrVuEM53baCN9cyh3I5I-IOKZ3QwiUb2qUbyhwPmrOiHmw_Gt-oUr577qg%3D
Details: As one of FIA's premier events, the 36th Annual International Futures Industry Conference is host to an influential audience of 800 senior-level futures industry professionals, brokerage executives, technology and operations officers, exchange officials, money managers, and public policy leaders. Delegates from more than 30 countries attend this annual event.
SIFMA 2nd Annual Private Client Conference
When: Apr. 7 and 8, 2011
Who: SIFMA
Where: New York City
Full Info: Full info: http://www.sifma.org/events/event.aspx?id=22289
Details: On April 7 and 8, the SIFMA 2nd Annual Private Client Conference, "Client First: Delivering the Vision," will build on the success of the inaugural Private Client Conference during the spring. This two-day event combines the strengths of SIFMA's former Sales & Marketing, Small Firms and Independent Firms conferences, producing North America's premier conference for private client groups at all levels. This conference is designed for senior managers in private client groups at global, regional, independent contractor and small broker-dealers, including national sales managers, regional directors, branch managers, wealth-management specialists, marketing specialists, and individual financial advisers and investment consultants.
Economic News
Third-quarter GDP raised, home sales bounce back
Reuters
Sales of previously owned U.S. homes rose in November, offering the latest sign the economy was ending the year on a more solid footing after a sluggish third-quarter performance.
http://jlne.ws/fyL0nl
Raising GDP growth estimates for 2011 on tax agreement, now forecast 3.1% in Q1
Reuters
JPMorgan (JPM.N) took a hit in its equity capital markets business in 2010 even though its dominance in debt markets allowed it to cling on to the global top spot for investment banking fees.
http://ht.ly/3sadW
Exchanges, Clearing Houses & MTFs
ELX to SEC: new rules unfairly benefit NYSE
By Ann Saphir, Reuters
ELX Futures LP told regulators late Wednesday that a proposed rule would give NYSE Euronext's U.S. futures exchange an unfair advantage against ELX in competing against CME Group Inc, and should be rejected. ELX Futures, whose own attempt to challenge CME Group 's dominance in the lucrative market for Treasury futures trading has met with limited success, said that the proposed rule will enshrine NYSE Euronext 's co-owned New York Portfolio Clearing as
a "monopolist."
http://jlne.ws/gzDj6u
Firms & Banks
Deutsche Bank to pay $550 million in tax shelter case
By Blake Ellis, CNNMoney
Deutsche Bank AG agreed Tuesday to pay more than $550 million for taking part in fraudulent federal tax shelters, according to federal regulators.
http://jlne.ws/i0kegp
JPMorgan tops fee pool, equity business takes hit
By Sarah White, Reuters
JPMorgan (JPM.N) took a hit in its equity capital markets business in 2010 even though its dominance in debt markets allowed it to cling on to the global top spot for investment banking fees.
http://jlne.ws/flz4NU
Bottom line on bonuses: Banks not that profitable
The Globe and Mail
The average return on equity for U.S. and European banks is barely 5 per cent
http://jlne.ws/hDQKGZ
Bankers face new year uncertainty
Investors Chronicle
The global financial crisis, followed quickly by a deep recession, has already meant plenty of change for the UK's beleaguered banks. Indeed, two of them - Royal Bank of Scotland (RBS) and Lloyds - are now heavily state owned after the government took big stakes in order to recapitalise the pair.
http://jlne.ws/eRJfZl
Goldman Sachs Strategy: 'Be Goldman in More Places'
Wall Street Journal Blogs
Nomura analyst Glenn Schorr -- who was bearish on Goldman Sachs last week -- today said he's feeling a bit better about the investment bank's outlook for 2011.
http://jlne.ws/gySUoR
Goldman Sachs's Blankfein Is `Reasonably Bullish,' Nomura's Schorr Says
Bloomberg
Goldman Sachs Group Inc. 's top executives view investment banking as having the best prospects next year and expect fixed-income to pick up as well, according to Nomura Holdings Inc.
http://jlne.ws/eOTDT0
Morgan Stanley's CEO James Gorman Explains Why They're Getting All The Government's Business
Business Insider
James Gorman talked to CNBC about whats next for Morgan Stanley and why it's the government's bank of choice. He is a bundle of positivity about the market, and his bank.
http://jlne.ws/dUKPqt
Wells Fargo hires Deutsche Bank executive
San Francisco Chronicle
Wells Fargo & Co., the fourth-largest U.S. lender by assets, hired John Fowler, who has led European health care at Deutsche Bank AG, and five managing directors to expand its investment-banking division. Fowler will be...
http://jlne.ws/hRUrVt
How Deutsche kept a pension scandal firm afloat
CNN Money
A Dallas-based private equity investor will be sentenced early next year for his role in New York's public pensionkickback scandal. What won't be mentioned, however, is how a major Wall Street bank may have helped keep him in business.
http://jlne.ws/hqd3IJ
Wells Fargo Securities Hires Six Senior Investment Bankers
Business Wire
Wells Fargo Securities, part of Wells Fargo & Company, today announced that six senior investment bankers are joining its Investment Banking and Capital Markets division.
http://jlne.ws/guHRXV
Arizona sues Bank of America over mortgage servicing
Reuters
The state of Arizona has sued Bank of America Corp (BAC.N), alleging that the bank has consistently misled consumersabout its home loan modification process, a source familiar with the situation said.
http://jlne.ws/gCAJtT
RBS Sells $6.1 Billion of Assets to Mitsubishi UFJ
BusinessWeek
Royal Bank of Scotland Group Plc sold about 3.9 billion pounds ($6.1 billion) of project finance assets to Bank of Tokyo-Mitsubishi UFJ Ltd.
http://jlne.ws/f8UUve
Goldman Deal Pushes Commercial Mortgage Bond Sales Past $11 Billion Mark
Bloomberg
Goldman Sachs Group Inc. and Citigroup Inc. sold $876.45 million of bonds linked to U.S. commercial real estate, pushing 2010 sales to $11.5 billion as strategists forecast next year's offerings will quadruple.
http://jlne.ws/g7Wxjj
Citigroup Opens High Tech Branch in Union Square
NYConvergence
In an effort to spruce up its consumer facing operations, Citigroup Inc. is opening a flashy new branch in Union Square today at the location of the Virgin Megastore that closed down mid 2009. The branch, apparently the first in a string of planned 'flagship' branches in major US and international cities, features laptops and [...]
http://jlne.ws/eO7Kn9
Morgan Stanley CEO: I will escort out any bonus leakers
New York Post
Talk about going off script. Morgan Stanley Chief Executive James Gorman raised some eyebrows during a routine conference this week when he threatened to "personally escort" [out] anyone found leaking any details of the firm's compensation levels to the media, The Post has learned. Gorman, who has been pushing...
http://jlne.ws/e8PsRK
Morgan Stanley on track to top Europe's M And A rankings
eFinancial News
Morgan Stanley is on track to top the coveted mergers and acquisitions league tables for Europe for a second year in a row, in what turned out to be another dismal 12 months for deal-making in the region.
http://jlne.ws/fGkk3n
Diamond to Become Barclays CEO Three Months Earlier
By Jon Menon and Gavin Finch, Bloomberg
Barclays Plc, Britain's third- biggest bank, said Robert Diamond will take over as chief executive officer three
months earlier than planned.
http://jlne.ws/i6KKAx
Bank of America appeals $595 million Lehman ruling
Reuters
Bank of America (BAC.N) has appealed a bankruptcy court order that it must pay Lehman Brothers Holding Inc
(LEHMQ.PK) about $595 million, according to court documents.
http://jlne.ws/erh4xv
Regulators
Board Chairmen Selected for Richmond Fed Branch Offices
Federal Reserve Bank of Richmond
The boards of directors of the Federal Reserve Bank of Richmond's Baltimore and Charlotte branch offices elected the following to serve one-year terms as chairmen, effective Jan. 1, 2011...
http://jlne.ws/dGkJxs
CFTC Swap Plan May Save Billions in Bank Revenue
By Matthew Leising - Bloomberg
A revised proposal by the Commodity Futures Trading Commission for how private swaps can be traded will prevent dealers from losing billions of dollars in revenue, according to Moody's Investors Service analyst Alexander
Yavorsky.
http://jlne.ws/eQZ5fx
Basel eyes rules to push use of central counterparties
Reuters
Global banking regulators proposed on Monday that banks should only have to set aside small amounts of capital when dealing with supervised central counterparties, in a consultative paper aimed at further stabilising the financial system. Transactions carried out via central counterparties are seen as more transparent than those made in the over-the-counter deals. There is also greater liquidity in centrally cleared markets.
http://jlne.ws/i8a9xJ
FINRA had busy year in 2010
Press Release
The Financial Industry Regulatory Authority (FINRA) significantly expanded and enhanced its investor protection and market regulation capabilities in 2010 in each of the areas central to its investor protection mission, including: market and firm regulation, transparency, registration and disclosure, dispute resolution and investor education. FINRA's work progressed amid continuing changes sweeping financial markets, ongoing economic challenges and the implementation of a new industry regulatory framework.
http://jlne.ws/fgxSqg
ECB Warns Ireland on Legislation
BY Brian Blackstone, WSJ.com
The European Central Bank warned Ireland that proposed legislation revamping the country's financial system could threaten some of the ECB's operations, and pressed Irish officials for assurances that the central bank's collateral rights will be protected.
http://jlne.ws/eh8aXV
OTC
Derivatives clearing creates new battleground
By Jeremy Grant - Financial Times
Three months ago, the oldest bank in the world took a very 21st-century financial instrument and produced something new in global finance. Italy's Banca Monte dei Paschi di Siena, founded in 1472, arranged for interest rate swaps - a type of derivative used to insure against rate fluctuations - to be processed through a London clearing house. The move sounds arcane. But pushing derivatives into clearing houses is an important part of reforms initiated by the Group of 20 leading nations and now being implemented to help safeguard the system against another Lehman Brothers-style default.
http://jlne.ws/dG37Mt
House Republicans Urge Regulators to Exempt Manufacturers From Swaps Rules
Bloomberg
Two U.S. lawmakers who will take leadership roles in the next Congress said regulators must ensure manufacturers and
commercial end-users are exempt from margin requirements for the $583 trillion swaps market.
http://jlne.ws/eqp0Td
Commentary: The Role of SWAPs In The Financial Panic of 2008
Traders Magazine
There were many causes of the Financial Panic of 2008.
http://jlne.ws/e6Jwxr
Global News
Brazil Inflation Report Signals Rate Hike In January
by Win Thin, Credit Writedowns
Brazil central bank’s quarterly inflation report was quite hawkish, and caught the market off-guard after the
decidedly more dovish minutes from the December 7/8 COPOM meeting were reported last week. In those minutes, the
central bank put a lot of weight on its decision to hike reserve requirements December 3, calling it a “fast and
powerful” tool to contain domestic demand pressures. Some took this as a dovish slant with regards to less need for
SELIC rate hikes, but we disagreed then.
http://jlne.ws
German business boosted by easier credit
By Ralph Atkins Daniel Schäfer, FT.com
German companies’ access to credit is better than at any time since the global financial crisis first erupted, with
favourable financing conditions fuelling a boom in domestic demand in Europe’s largest economy, research shows.
http://jlne.ws/eJTySf
Swiss govt to tighten big bank rules, scrap bond tax
Reuters
The Swiss government on Wednesday kicked off the legal process to tighten regulation of its biggest banks, UBS
(UBSN.VX) and Credit Suisse (CSGN.VX), in order to prevent a bank failure crippling the country.
http://jlne.ws/ecpwRF
IMF PFM Blog: Korean Institute of Public Finance Hosts International Fiscal Experts Forum
Korea Hosts International Workshop on Fiscal Policy Issues
Against the backdrop of a severe fiscal crisis in some European countries, the Korean Institute of Public Finance
(KIPF) hosted an International Fiscal Experts Forum in early December 2010. A major aim was to promote an exchange
of views on fiscal policy issues, countries’ responses to the crisis, and relevant issues for Korea. The workshop
brought together a number of prominent speakers, scholars, and practitioners from various countries. The topics
covered included: fiscal policies after the crisis, budget performance management, accrual accounting, the impact of
the crisis on subnational governments, and recent issues in legal frameworks for budget systems.
http://bit.ly/h9exyB
Banks to overhaul global pay structures
By Patrick Jenkins in London - Financial Times
The world's biggest investment banks are to overhaul their pay structures to differentiate between bankers based in
Europe and those who work elsewhere, after European regulators' clampdown on bonuses. Many US and Swiss banks are
considering paying higher salaries and lower bonuses to top bankers based in the European Union, mostly in London,
to ensure they comply with new instructions from the Committee of European Banking Supervisors (CEBS), the pan-EU
regulator, limiting cash pay-outs.
http://jlne.ws/hYS8oQ
Irish Banks' Credit Slashed Again
TheStreet.com
Five of Ireland's remaining banks had their credit rating downgraded on Monday. Allied Irish Banks , Bank of
Ireland, EBS Building Society, Irish Life & Permanent, ICS Building Society and Irish Nationwide Building
Society each had their credit rating lowered several notches by Moody's Investor Services. The downgrades were
applied to several layers of the banks' ratable ...
http://jlne.ws/fXuGbt
U.K. Could Have Sought $3 Billion More for Insuring RBS Assets, NAO Finds
Bloomberg
An "exit fee" of as much as 4.4 billion pounds for the early termination of the taxpayer-funded Asset Protection
Scheme could be justified, the NAO said in a report published today. Instead, RBS last year agreed to pay 2.5
billion pounds were it to exit the program.
http://jlne.ws/eHABH4
Banks told must restrain bonus payments
Reuters Finance News (EU) via Yahoo! UK & Ireland Finance
British politicians and the Bank of England stepped up pressure on banks on Friday to rein in bonuses, as a new code
on bonus curbs from the country's financial regulator said some ...
http://jlne.ws/g7FJva
Banks face an extra L80bn of bad debts
Daily Telegraph
Britain's four largest lenders are facing losses on loans to consumers of up to L80bn over their own forecasts, the
central bank has warned in its latest Financial Stability Report.
http://jlne.ws/fEfLYk
Moody's cuts Irish bank ratings
The Globe And Mail
Ratings agency Moody's on Monday downgraded four Irish banks and an insurer, including some of the liabilities
guaranteed by the government – a reminder of the financial mess the country faces at it begins to draw on an
international rescue loan.
http://jlne.ws/gBU3FO
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