LIBOR to end in 2021…as regulator says bank benchmark is untenable

Libor, the nearly 50-year-old global borrowing benchmark that became a byword for corruption, is headed for the trash heap of history.
The U.K. Financial Conduct Authority will phase out the key interest-rate indicator by the end of 2021 after it became clear there wasn’t enough meaningful data to sustain the benchmark that underpins more than $350 trillion in securities, Andrew Bailey, the head of the regulator, said in a speech Thursday at Bloomberg’s London office.
The end of the London interbank offered rate, or Libor, is welcome on many levels for regulators. It was tied to some of the banking industry’s biggest scandals, leading to about $9 billion in fines and the conviction of several bankers for manipulating the rate. Relying on the opinions of industry insiders to set the daily estimates based on interbank lending — some in markets that saw fewer than 20 transactions annually — was unacceptable, Bailey said.
“Libor is trying to do too many things: it’s trying to be a measure of bank risk and it’s trying to substitute for interest-rate risk markets where really it would be better to use a risk-free rate,” said Bailey in an interview with Bloomberg News before the speech. “It’s had to come to a conclusion.”

This post was published at bloomberg

Stockman Slams Trump Administration’s Budget Projections As “Fantasy”

David Stockman joined Bloomberg Markets to discuss President Donald Trump’s latest budget projections. After the White House and current Office of Management and Budget director Mick Mulvaney released various statements on the budget proposal viability conversations already began within the GOP and Congress.
When prompted by host David Gura over his thoughts, even reflecting on former Treasury Secretary Summers comments that the budget is ludicrously optimistic, David Stockman did not mince words speaking on Washington.


This post was published at Zero Hedge on Jun 15, 2017.

Och-Ziff Suffers Record Redemptions In First 4 Months Of 2017 As AUM Plunges

One year after Och-Ziff Capital settled a bribery case that led to jump in redemption requests and an exodus in high profile executives, on Tuesday the hedge fund reported that it suffered record net withdrawals in the first four months of the year, extending several straight quarters of outflows.
The firm reported net redemptions of $4.8 billion in the first quarter and an additional $2.1 billion from April 1 and May 1. At the same time, assets under management declined from $37.9 billion as of December 31, 2016 to $32 billion as of the beginning of May, a record $5.9 billion decline, and a 24% drop from a year earlier.
As discussed at the time, and as Bloomberg reminds this morning, the redemption wave started when the hedge fund settled a five-year bribery probe and saw founder Dan Och singled out by regulators for ignoring red flags and corruption risks. Och-Ziff agreed to pay more than $400 million in September to settle U. S. charges that it paid bribes to gain business in Africa. Its OZ Africa Management GP unit pleaded guilty to conspiring to bribe officials of the Democratic Republic of Congo.

This post was published at Zero Hedge on May 2, 2017.

‘Fragile’ US Economy Hammered In Q1 By Election-Spending Hangover

Growth in U. S. personal consumption expenditures in the first quarter of 2017 was slowest since 2009, according to data released Friday by the Commerce Department.
A big reason for that was the second-largest contraction in spending by non-profits (i.e. election-related lobbying/spending) in 57 years of data.
As Bloomberg details, according to monthly consumption data through February, the drag seems to owe to a sharp decline in spending by professional advocacy groups, which always surges during U. S. presidential elections, and hit a record high in November.

This post was published at Zero Hedge on May 1, 2017.

Battle Royale: JPMC’s Dimon and Minneapolis Fed’s Kashkari Battle Over Bank Capital

This is a syndicated repost courtesy of Confounded Interest. To view original, click here. Reposted with permission.
Bloomberg has nice piece on the battle between JPMorganChase’s Jamie Dimon and the Minneapolis Fed’s Neel Kashkari.
(Bloomberg) Jamie Dimon is America’s most famous banker, and Neel Kashkari is its most outspoken bank regulator, so it’s not a shock that they would eventually come to blows. What’s interesting is that their contretemps is over an acronym that most Americans have never heard of, but one that may be central to preventing another recession.
TLAC, which is pronounced TEE-lack, is something you need to know about if you want to judge the sparring between Dimon, the well-coiffed chief executive of JPMorgan Chase & Co., and Kashkari, the very bald man who ran for governor of California on the Republican ticket and is now president of the Federal Reserve Bank of Minneapolis.
On April 6, Kashkari went after Dimon in a way that circumspect central bankers ordinarily don’t. In an essay published on Medium and republished on the Minneapolis Fed website, he challenged Dimon’s assertion in his annual letter to shareholders that 1) there’s no longer a risk that taxpayers will be stuck with the bill if a big bank fails, and 2) banks have too much capital (meaning an unnecessarily thick safety cushion). Wrote Kashkari: ‘Both of these assertions are demonstrably false.’

This post was published at Wall Street Examiner by Anthony B Sanders ‘ April 14, 2017.

Has Middle Class America Been Fleeced?

Noah Smith, writing in Bloomberg, says that middle class America has indeed been fleeced by our national economic policies. We agree. But which policies have been responsible?
Smith mentions and immediately dismisses trade, immigration, economic regulation, and welfare policies. The real villain in his view is an alleged turn toward managing the economy on free market lines: ‘Your prosperity was taken by the very people who promised to ensure and enhance it. The decades from 1980 through 2008 were the age of neoliberalism — the ideology of the free market.’
This is a story that we hear more and more. Neoliberals, the favorite new epithet on the left for free market exponents, have ruled the roost for decades ( note how the Obama administration is simply ignored in the preceding quote), and have left the poor and middle class far worse off than they were.
The truth is that the Bush-Clinton-Bush-Obama era had much in common, and it was not free market principles. It was an era of unrestrained crony capitalism, in which special interests formed stronger and stronger alliances with government in order to secure economic monopolies and other privileges.

This post was published at Ludwig von Mises Institute on April 8, 2017.

New European Regulations Set To Crush Equity Research Budgets By $300 Million

Literally no one knows the true ‘value’ of equity research, not even the investment banks that are selling it. Up until now, equity research has been treated as a ‘freebie’ given away to institutional clients in return for trading commissions but that is all about to change thanks to the European Union’s MiFID II regulations, which require asset managers to separate trading commissions from investment-research payments.
Unfortunately, at least for the Investment Banks of the world, while the cost of generating equity research may be substantial, it turns out that the true ‘value’, as defined by institutional clients’ maximum willingness to pay for reports, may be much less. Which is shocking given the creativity required to constantly generate new variations of daily reports politely suggesting that you “Buy The Fucking Dip.”
As Bloomberg notes today, the regulatory change slated to take effect next January could cost the I-banks $300 million in fees.
Asset-managers in Europe and the U. S. will probably cut more than $300 million from research budgets in anticipation of regulations aimed at rooting out conflicts of interest in the market for investment information.
That’s according to a survey of 99 fund managers and traders conducted by consulting firm Greenwich Associates, which assessed the shake-up coming to the multi billion-dollar market for investment research over the next year.
The European Union’s MiFID II regulations, which require asset managers to separate trading commissions from investment-research payments, will have a ‘clearly negative’ impact on the amount of commission money that is spent on research and advisory services, according to the Stamford, Connecticut-based firm’s findings released Tuesday. While the budget cuts will be ‘relatively modest’ at individual asset-managers, research providers across the board fear the new law will prompt ‘a substantial decrease’ in buy-side spending.

This post was published at Zero Hedge on Mar 15, 2017.

Och Ziff In Trouble: AUM Plunges After A Record $4.8 Billion In January Redemptions

One of the world’s largest, public hedge funds, Och Ziff, gave active managers around the globel more reasons for concern this morning, when it reported results today which showed distributable earnings of $7.5 million, or one cent a share, in the quarter compared to a loss of $36.1 million, or 7 cents, a year earlier. For the full year, the company reported a loss of $121.3 million from a profit of $251.9 million in 2015. Revenue tumbled from $342.8mm to $281.3mm. However, the flashing red headline is just how much AUM the recent underperformance and legal problems by Daniel Och’s investment vehicle have cost him.
As Bloomberg reports, Och Ziff suffered withdrawals of about $13 billion over the last 13 months as the company settled a five-year bribery probe and saw its founder Dan Och singled out by regulators for ignoring red flags and corruption risks.

This post was published at Zero Hedge on Feb 15, 2017.

Trump Concerned There Are Too Many “Goldman Guys” On His Team

Two days after democratic senators Elizabeth Warren and Tammy Baldwin sent a letter to Goldman CEO Lloyd Blankfein, asking if Goldman effectively runs the country through its extensive alumni links at the Trump administration, and requesting details on “lobbying” activities in the bank related to review of the Dodd-Frank Act and the Obama-era fiduciary rule on financial advice, as well as asking for any communication between the bank’s employees and Cohn, Mnuchin, nominee for the SEC chair Jay Clayton and chief strategist Steve Bannon, Bloomberg reported overnight that yet another Goldman banker, Jim Donovan, was under consideration for the No. 2 job at the Treasury Department, however it appears he has “got one big thing working against him.”
That “thing” is the overdue realization by the new president that his cabinet openly appears to have been created and staffed by populism arch nemesis #1, Goldman Sachs. Besides Steven Mnuchin, Trump’s pick for Treasury Secretary, former Goldman officials working for the new administration include former president Gary Cohn, now director of the National Economic Council; Stephen Bannon, the chief White House strategist; and Dina Powell, formerly the bank’s head of philanthropic investment, who’s an assistant to the president and senior counselor for economic initiatives.
So just like Goldman would staff every central bank’s core positions prior to Trump, after the US election, the world’s most influential investment bank has shifted all of its attention on just one person, and he is finally starting to realize that that may not be a good thing.

This post was published at Zero Hedge on Feb 12, 2017.

Why Davos CEOs Think They Have Control Over Trump

While President Trump chose not to attend the elite extravaganza in Davos last week, choosing instead to lambast the great-est and good-est of the world’s executives in their crony capitalist safe space, the cognitively dissonant CEOs reassured each other by saying ‘ignore the tweets’, confident that “if [Trump] knows the facts, he’ll respond according to the facts.” It depends whose ‘facts’ those are, of course.
As Bloomberg so eloquently noted, executives gathered in the Swiss resort for the World Economic Forum this week keep repeating, like a soothing mantra, that Donald Trump is at heart a pragmatist who will avoid trade wars and regulations that make it harder to do business.
Everywhere you looked, and everything you were told confirmed that nothing has changed in the minds of the world’s elite community organizers… (as Bloomberg summarizes)

This post was published at Zero Hedge on Jan 22, 2017.

Trump Advisor Anthony Scaramucci Pockets $100MM From Sale Of SkyBridge To Chinese Conglomerate

It has been a good day for Trump advisor Anthony Scaramucci.
First, he was named by Bloomberg as this year’s surprise Davos star (recall that he is the only member of the Trump team participating unofficially at the Swiss boondoggle. ‘I brought a food taster,’ Scaramucci joked in an interview on Bloomberg Television when asked about his solo mission). As a reminder, Scaramucci was recently named an assistant to the president and further told Bloomberg Television Tuesday that he will serve as a liaison between the White House and the business community, and work with local, state and foreign governments and trade associations.
Which brings us to the second reason why Anthony is smiling.
Today, as part of his shedding of potential conflict of interest, Scaramucci sold a majority stake in his SkyBridge Capital fund of funds, which has had prominent cameos in such movies as Wall Street 2, to HNA Capital U. S., which is controlled by Chinese billionaire Chen Feng, and RON Transatlantic EG. While terms of the deal were not disclosed, the deal, which includes the SkyBridge Alternatives Conference, or SALT, is said to be valued at about $200 million according to Bloomberg, and could increase to about $230 million if certain conditions are met. SkyBridge’s senior management and investment teams will remain intact while Scaramucci will step down.

This post was published at Zero Hedge on Jan 17, 2017.

Trader Warns – Treat The Trump Presser Like A Trending Market

In a few short hours we’ll be treated to the President-Elect’s much-anticipated first press conference. We’re not sure there’s been a more eagerly awaited event of its kind in memory. As Bloomberg’s Richard Breslow notes, global markets (ex-Mexico and Turkey) have ground to a halt. You can cut the anticipation with a knife.
Will the powerful trends we’ve seen for the last two months continue? Or reverse with a vengeance? All will be revealed. And investors will know exactly which the best trades to set up their year are.
Don’t get your hopes up. But who knows? It’s a must-listen in any case.
Investors will do their best to focus on comments and policy prescriptions specifically aimed at various sectors of the S&P 500. There will be a natural tendency to try to ignore as unpricable potential policies that affect massively important geopolitical and international economic issues. That might work in trading the S&P financials index this afternoon. But perhaps not so well for the Asia dollar index, where the countries comprising that measure are already being forced to speculate on what the acronym might be for a China-led economic and security pact.

This post was published at Zero Hedge on Jan 11, 2017.

Buy C-R-A-P

We live in a modern world of acronyms and buzzwords, and the financial industry is certainly no exception. In fact, it may be one of the worst culprits, what with FANG, ZIRP, TINA, BREXIT, QUITALY, BRIC, etc. all entering the lexicon over the last few years. Yet, creating some catchy collection of consonants remains one of the most surefire ways to attract attention in this business since it, admittedly, makes for a great headline and gives strategists like us something fun to write about (‘fun’ being a relative measure). Well, now the new eye-catching acronym to watch, according to Tom Lee of Fundstrat is C-R-A-P – Computers, Resources, American Banks, and Phone Carriers – which are all levered to the investment recovery, inflation, and deregulation expected over the next year. Before I comment further on those recommendations, though, I want to point out that I like to follow Tom Lee’s thoughts because, like us, he lets the data do most of his thinking, and, like us, he was one of the few pundits last year who actually saw potential for the US stock market. He backed that up, too, with one of the highest S&P 500 targets among strategists for 2016 (2325), but now, according to Bloomberg, he has the lowest price target for 2017 among the fifteen strategists they track (2275), further proof that he doesn’t just parrot consensus numbers.
Reading between the lines of his comments, Lee does not see a substantial upside for the stock market as a whole in 2017, at least not without a pullback first, but he does believe a potential exists among individual areas of the market. This line of thinking is consistent with our view that passive indexing may be more frustrating for this type of investing environment because you will be dragged down by the underperforming sectors and the increased volatility may make it more difficult to hold onto positions long enough to achieve the eventual performance. We generally agree, too, that the C-R-A-P stocks should do well in the political and economic landscape that many expect on the horizon. If inflation does pick up, driven by fiscal stimulus and more robust economic growth, Fundstrat argues that the contemporaneous increase in wages will not hit technology company margins as hard given their reliance on more high-skilled workers, and we, too, continue to advise an overweight of Tech to benefit from the Computers sub-sector. The big acronym of 2015 and 2016, the so-called FANG stocks, may already be coming back into favor, as well, with Facebook Inc. (FB/$123.41/Outperform), Amazon.com Inc. (AMZN/$795.99/Outperform), Netflix Inc. (NFLX/$131.07/Outperform), and Alphabet Inc. (GOOG/$806.15/Outperform) all breaking out to new reaction highs last week.

This post was published at FinancialSense on 01/10/2017.

GSA Changes Tune, Says Trump Not In Violation, “Democrats Mischaracterized What GSA Said”

Here is GSA Statement, knocking down claim by House Dems that it has ruled that Trump will breach his contract on his DC hotel when sworn in pic.twitter.com/9CNK1NM1OK
— Eric Lipton (@EricLiptonNYT) December 14, 2016

Update: It appears there may have been some confusion, because moments ago the GSA now says that it has not concluded Trump would be in violation regarding the Trump Hotel, and adds that Democrats mischaracterized what GSA official said.
President-elect Trump has until inauguration day to divest himself of all ownership interest (not just management) of the Trump International Hotel in Washington D. C. or he will be in violation of his lease, according to the agency in charge of government buildings. The lease, according to a letter from four Democrats, forbids elected officials from being party to the deal or receiving any of its benefits, makng the hotel the most visible potential conflicts of interest for Trump.
As Bloomberg reports, an official of the General Services Administration, which leases government buildings, told the staffs of the four lawmakers that Trump will be in violation of the lease unless he divests, according to a letter written by the Democrats.

This post was published at Zero Hedge on Dec 14, 2016.

Rick Perry Is Trump’s Top Pick To Head Energy Department

With many of the key cabinet positions in Trump’s administration having been filled, one major post remained open: that of Energy Secretary. However according to Bloomberg, the mystery is almost over as Donald Trump has narrowed his search for energy secretary to four people.
Which is amusingly ironic, because five years ago, Perry wanted to eliminate the Energy Department: in an infamous 2011 Republican primary debate, Perry forgot that the Energy Department was one of the three federal government agencies he wanted to do away with. The other two were the Commerce and Education Departments. According to some pundits, the gaffe may have cost him a shot at the party’s 2012 nomination.
Texas’ longest-serving governor Gary was indicted in 2014 for abuse of power and coercion after threatening to veto funds for a Travis County office that investigates corruption unless the district attorney, who had pleaded guilty to driving while intoxicated, resigned. Another potential conflict of interest: Perry serves on the board of Energy Transfer Partners LP, the company whose pipeline project has drawn opposition in North Dakota and has become a rallying cry from environmentalists. While the Obama administration has stalled the project, Trump has said federal approvals for energy infrastructure need to come quicker.

This post was published at Zero Hedge on Dec 11, 2016.

Nothing fake about the top 0.1% holding the same amount of wealth as the bottom 90%.

While people argue about what is real and fake news the widening gulf of inequality in the real world only continues to expand. This is actually happening and for the ultra wealthy that hold most of the wealth, all of this distraction is a good thing. The latest wealth report from Deutsche Bank Research shows that wealth inequality is at levels last seen during the Roaring 20s. The problem with this kind of inequality is that it has come from largely hollowing out the middle class and also creating a large crony financial system that is designed to suck out productivity in the real economy and shuffle it over to folks in suits sitting behind Bloomberg terminals. In other words, those that work and build the economy get shafted from the financial hubs of the world. This global financial drain does not adhere to national borders but is driven by the worldwide financial elite that collect trophy apartments in major metro areas. All this happens while your typical American family struggles to buy a home. There is nothing fake about the current level of wealth inequality.
The wealth spectrum
One of the most startling figures in the latest report is that the top 0.1% hold as much wealth as the bottom 90%. And this is happening in the United States, the wealthiest nation in the world.

This post was published at MyBudget360 on November 26, 2016.

Jill Stein Crushes Hillary Clinton As “The Queen Of Corruption”

“The American people are hungrier than ever for a politics of integrity” argues Green Party presidential candidate Jill Stein in this brief Bloomberg TV clip, exclaiming to Tom Keene that “Hillary Clinton is the queen of corruption and Donald Trump is a walking scandal.”
Short and sweet, but seems to sum it all up nicely…

This post was published at Zero Hedge on Nov 4, 2016.

Conflicts Of Interest

Fed Governor Lael Brainard has donated to Clinton’s campaign and is widely viewed as a potential Clinton pick for Treasury secretary. Yellen hesitated and then demurred when Representative Scott Garrett of New Jersey asked whether Brainard would have a conflict of interest if she were indeed in talks with Democratic nominee Hillary Clinton’s campaign about a position. The election takes place Nov. 8.
‘I would have to consult my counsel, I’m not aware that that’s a conflict,’ Yellen said in testimony to the House Financial Services Committee in Washington, while rejecting Garrett’s suggestion that the U. S. central bank has a political bias.
Source: Fed Politics in Spotlight as Yellen Cornered by Lawmaker | Bloomberg
Imagine how higher management would feel about you reacting in the same situation. Goldman has been known to lay off its employees for even donating to the Trump campaign. So a similar situation would be you, an employee of a firm, donating to a political campaign, and later getting a promotion as a result of that donation.
Of course, Lael Brainard herself has a long history of working in the executive branch to begin with. She initially served in Bill Clinton’s administration, and was appointed Undersecretary of the Treasury for International Affairs early in Barack Obama’s presidency. In 2014, she was nominated to the Federal Reserve Board of Governers, and it appears the majority of ‘conflicts of interest’ and connections with her past employers were largely ignored during her confirmation.

This post was published at Zero Hedge on Oct 5, 2016.

Wells Fargo 2.0: Massachussetts Charges Morgan Stanley With Dishonest Conduct To Cross-Sell Product

Step aside Wells Fargo fake account scandal: moments ago Reuters and Bloomberg reported that Massachusetts Secretary of the Commonwealth William Galvin charges Morgan Stanley with ‘dishonest and unethical conduct’ related to ‘high pressure sales contests’ in Massachusetts, Rhode Island.
Here are the headlines:
Massachusetts charges Morgan Stanley with running unethical sales contests to cross sell products

This post was published at Zero Hedge on Oct 3, 2016.

China’s Big Ball of Money Isn’t Going Anywhere Near Stocks

This year is seen going down as the worst since 2011 for China’s stock investors as the memory of last summer’s rout lingers and speculative buying switches to the housing market.
The Shanghai Composite Index will end the year at 3,075, according to the median forecast in a Bloomberg poll of 10 strategists and fund managers. That implies a 13 percent drop over the 12-month period, the steepest in five years, and a gain of 2.9 percent from Wednesday’s close. Fading prospects for monetary easing, a slowing economy and the risk of higher U. S. borrowing costs spurring yuan weakness were among factors weighing on the nation’s shares, the survey showed.
Turnover on the world’s second-largest stock market has collapsed to a two-year low as China’s army of investors, unnerved by 2015′s plunge in equity values, charged into other assets. After a frenzied bet on commodities futures soured, they have set their sights on a bigger target – property. With new home prices now jumping the most in six years, analysts are scaling back projections for interest-rate cuts.
‘The property market and the stock market are like a seesaw,’ said Li Lifeng, a strategist at Sinolink Securities Co. in Shanghai. ‘If the ‘fever’ in the property market doesn’t cool down, funds will flow from equities into real estate.’
Small-cap technology stocks are the least preferred by analysts in the survey because of stretched valuations, while building companies are favored thanks to government efforts to boost infrastructure investment.

This post was published at David Stockmans Contra Corner on September 29, 2016.