Ex-JPMorgan Trader Released, Opposes Extradition

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Aug. 27 (Bloomberg) -- In today's "Global Outlook," Bloomberg's Manus Cranny discusses former JPMorgan Chase trader Javier Martin-Artajo's release from police custody after telling a Madrid court he opposed attempts by U.S. prosecutors to extradite him on charges he hid trading losses that cost the bank $6.2 billion. (Source: Bloomberg)

They are not interested in higher prices.

We appreciate your time.

We will be back with more on the markets in 30 minutes.

In the meantime, "streets mark" is next.

We uncover safety zones in a dangerous market.

Catch and release, a jpmorgan traitor turns himself in and then gets turned free.

-- trad er turns himself in and then gets turned free.

Get the round of the biggest business stories.

From bloomberg world headquarters in new york, this is "street smart." the summer selloff has arrived.

A perfect storm and stocks.

Welcome, everyone can't to the most important hour of the session.

-- welcome, everyone, to the most important hour of the session.

Look at the selloff.

There are so many unknowns.

They are big picture unknowns.

The three charts you need to see to tell the story.

The dow industrials are near the low of the day, down 150 points.

Look around the world, it was a lot worse than that.

Moving to the 10 -- year yield.

In times of uncertainty, in spite of all the talk, people are buying bonds today.

It is sending the yield lower.

You can look at the 10-year he yield, 2.7-year-old -- 2.72%. that is painful because that hurts all of us.

Let's head to the big preview.

Julie hyman is keeping an eye on things.

Those oil prices, making it more expensive for us and for airlines.

A direct correlation as we see the increase in the price of oil and jet fuel.

Ual leading the pack lower if you look among the major airlines.

The other airlines are following suit.

You guys talked about home prices.

The case schiller index showed an increase of 12.1%, but it was a little bit of a slowdown.

There are some concern that there are some shakes in this housing market -- we are seeing d.r. horton being hit today.

I have to give you a little bit of grain.

The best performer in the s&p 500, goodyear tire & rubber.

Its union ratified a four-year labor agreement.

That stock has been a standout all day long.

Julie, time for safety, time for insight and action.

This is how the world looked when we all got up this morning.

It was frightening.

In the u.s., down a percent.

Europe, two percent.

Take your pick, every major market around the world was down . it begs the question, where do we go now?

Gold is one possibility.

Old and oil, very volatile -- gold and oil, very volatile.

You can go to bonds, yes, they are moving the right way, but then you are moving -- dealing with the fed.

That brings us to dividends.

When in doubt, you can always turn to dividends.

We ran a screen of the s&p 1500. dividend growth of more than five percent.

Earnings growth of at least two percent.

Guess what , only nine out of 1500 companies made the list.

Here they are.

I know i went quickly.

I am posting them all on twitter.

That is exactly what we're are going to do right now.

Our panel has a host of options to protect your gains.

We have stephen stanley, michael , and michael holland.

What do you do if you want to protect what you have right now?

One strategy that seems to work over the years is to have some stocks, stocks that have big upfront cash yields.

Four percent is a high benchmark . three percent, for example, you have a lot of great companies already yielding that.

At this point, because all of the things that are going on, we have to have some cash.

I would be careful with anything data at this point.

I know everyone is crying sos.

Anything that is market specific, stock specific.

Syria, oil, and summer.

Yield a spikes are very dangerous.

Interest rates are the heart and soul and life of the free enterprise system.

If you look at the way corporate rates have spiked, it looks like 1987. there were shocks to the market and the economy.

This is what is happening right here and right now.

In 1987, what preceded the crash was a disconnect between the bond market and the stock market.

1965? if you look at the relationship of stocks to bonds, a price ratio, the rate of outperformance of stocks versus bonds looks just like pre-1987. look at the 10-year.

Can we anticipate that will continue?

The yields dropped after the crash took place.

That cause the deflationary stock.

This is much more serious than people realized.

This is about everything related to the economy.

This yields spike is serious.

The fed has lost all control.

The complacency is immense.

We could eat in one of those global risk off junctures right now.

-- we could be in one of those global risk off junctures right now.

If this yields spike does not get controlled shortly, i want to be cautious not to get too much on the hysteria side , you did not have the central bank of 1987 have the same level of concern about the effect as we do now.

That could counter a more significant climbed.

These yield spikes are serious.

Are you concerned about these yield spikes?

As you guys mentioned, the key news of the day had to do with syria.

We're either going to bomb or not.

If we do, the whole thing might blow over within a week.

You have to be a little bit careful about time horizons.

If the serious thing comes and goes within a week or two, we are right back to where we were before.

If we are right back to that, are we back to higher interest rate environment.

That kind of fits into your concern.

As much as we are having that talk, they're starting to outperform.

Even within the bond market, there is a sense that this is serving a deflationary shock.

That has been your entire source.

There is a disconnect.

The disconnect -- there is no real inflation.

That is happening into the yields spike.

It is a fear thing and not an inflation thing.

Box going back into bonds, it is probably the safe thing to do.

Michael, are you buying this?

Not all of it.

1987 is an interesting contrast because long-term u.s. treasuries were yielding nine percent.

A pension fund or individual could look at a long-term rate of return and say, why would i even bother?

You had a 25% move in the market, which was spurred by peter wright trading -- computerized trading?

As michael just said, you had an event that caused people to say, i am backing off.

You could always get an unraveling.

The difference is you had stocks with much higher valuations in terms of pe multiples.

You are at 2.7% treasuries now, nine percent, 10 or 11 times for great companies.

There is a big value disconnect.

Which makes you more likely to have some cash, but still keep your money in stocks?

1.722.7. -- 1.7 22.7. i cannot see fixed income being a place -- i used to own a ton of tips in a mutual fund.

Today, we have tips yielding negative numbers.

There is a disconnect in the markets.

I know rates have been rising, but you only know that --we will not know until after the fact.

The fact that housing stocks have been performing as poorly as they have been tells you the biggest source of reflation and growth may be a drag.

How can the fed step away?

You are thinking of the fed is going to stay the course, are we going to see tapering?

I think they would be naiàve to ignore the message of the market at this point.

We will not see it, at least not in september?

It is very hard for them to step in with numbers that big.

Caper talk as early as september, is that realistic?

-- taper talk as early as september, is that realistic?

Not really doing it for the real economy.

Qe is a dangerous strategy.

It does not mean they are getting ready to run a tight monetary policy.

They will still be accommodative for a long time, but they are looking to get out of qe as quickly and as gracefully as they can.

I find it hard to believe that bernanke will have his legacy be a collapsing market.

The hardest thing to do for any central bank is to do nothing.

They will keep on trying.

I assure you they know only one thing and that is to print money.

It is a caper -- taper.

Ben bernanke does not want to leave on a down note.

The whole point is to tell the market that we are going to support you.

Even if i leave, on my way out -- the last thing he wants to do with tanks that.

He is a realist.

At the end of the day, if the numbers are just ok going into september, i do not think they have a choice but to do some tapering.

They would have to be really ugly numbers.

5 million tapering is not tapering.

It will not be 20. thank you so much.

Coming up, how the boss of the london whale beached himself.

That is coming up next.

? welcome back.

We are joined by mike holland.

Welcome back to "street smart." you have microsoft on your personal leo.

You say they are undervalued.

What is your real -- you have microsoft on your portfolio.

You say they are undervalued.

What is your real reason?

When you look at all of the different things that are available, these kinds of things go back to adams introduction several minutes ago about what is out there in the marketplace.

We talked about tips.

These companies have much better balance sheets than the u.s. government.

That is not hard, mike.

These are among the best balance sheets in the world.

The current yield than any fixed income.

Basically, a guarantee against inflation.

You have the best of both worlds.

Microsoft is in a bit of a spot right now.

A great place?

When tim geithner -- the guy who turned around ibm in the 1990s. he had no background in the business.

Ibm was finished.

Intel has been left for dead as well.

When they have the riches on their balance sheet and they can turn it around.

In 1999, microsoft traded at 85 times earnings.

It is now at 11 times earnings.

These are the kinds of companies that offer really good value.

All trading cheaper than the market.

Ibm, two thirds of the value.

When you do the flip of those numbers, you get the earnings yield.

10 times earnings, the earnings yield.

At 11, the number is nine percent.

At 12, 8 .5%. that is a good way.

We do not typically think of earnings yields, but that is what you need to do.

All right, coming up, the man who oversaw the london whale.

He turned himself into authorities and they turn him out.

When was the last time you tivo to something?

In that case, we are talking about 1999. ? this is "street smart." time for today's global outlook.

Our europe editor is visiting from london.

We are talking about developments in the london whale case.

He has done his deal, but there are two main for tagging tests.

He has handed him -- protagonists.

He has handed himself in in a madrid.

I do not want to be extradited.

I am disputing this.

Faced 20 years in jail if they are found guilty.

Did and they let him go?

They do not like this, do they?

Let's step back a little bit.

We have not had a court case.

Innocence before guilt.

The u.s., you have 40 days to devote up -- divvy up to justify the reason to ship them back home to face the charges.

I love this story.

What does it matter whether he has his passport?

Flight risk might have already possibly happened.

You have the french man.

He is taking it easy.

In france.

On vacation.

Lexi says it is cheaper.

-- he says it is cheaper.

It is cheaper than london.

He has nothing to worry about.

He traveled europe couple of months ago.

He is protesting that he is innocent as well.

The rob of it is extradition.

-- rub of it is extradition.

The french are not obligated under the terms of the treaty.

The one thing in this whole story, call me old fashion.

The guy sitting up above him -- you have bruno, the guy below him, and up above that you have his boss.

It mystifies me the guy who wrote the strategy and watch the screen every day, did the deal with the authorities.

Or something like that.

The younger guys are going to take the hit if they get extradited.

Amazing story.

When was the last time you tivoed anything?


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