Levine on Wall Street: A Round of Golf and a Movie

Links about golfing in Japan, layoffs in Europe, movies in America, hedging in D.C., bitcoins in China, and of course inflation in Duckburg.

Don't play golf with Japanese clients

Here is a story about how Sigeru Echigo, a Deutsche Bank "pension solutions" salesman in Tokyo, "is suspected of entertaining a client at a Mitsui & Co. unit in exchange for purchases of investment products." That is pretty much how it works! You take the client to "trips abroad, rounds of golf, and wine and meals," as Echigo did, and while lavishing attention on him you're all, hey, does your pension need some solutions? Mitsui's did: Echigo's 900,000 yen ($8,800ish) of entertainment spending yielded 1 billion yen ($9.8ish million) of financial products sales. But now Echigo, and the pension manager he wined and dined, have been arrested. That seems harsh. If you can't treat your clients to a round of golf, or hire their children, how are you going to win business?

Bad news for European bankers

"About 3,000 front-office jobs probably will be eliminated in 2014 at the 10 largest global securities firms, and the cuts could exceed 6,000 across the industry," according to a Deutsche Bank analyst. Europe will be particularly hard-hit, with recruiters estimating front-office cuts of 5 percent to 15 percent, given a weaker economy and more work to be done on cutting balance sheets than in America. Also I mean without client entertainment and nepotism surely revenues will be down. This is okay though; with the new European bonus caps did you really want those jobs anyway?

You can buy some stock with your movie tickets

The parent company of AMC Theaters is going public and is reserving some shares for members of "AMC Stubs," which I hope is a loyalty program. That is sweet. I sort of don't understand why companies don't do this more often: Every IPO has some allocation to retail, and retail investors love getting shares in hot IPOs, so why wouldn't the issuer prefer to reward its loyal customers with allocations rather than its underwriters' loyal retail customers? I guess the underwriters talk them out of it. Also, doing this provides lots of opportunities to disappoint your loyal customers: Not everyone will necessarily get shares (AMC is reserving a presumably small number "on a first-come, first-serve basis"), and of course sometimes shares go down. DealBook points out that Vonage let customers buy shares in its 2006 IPO, which fell 24 percent on its first day and kept falling from there.

The Volcker Rule will say some stuff

The Volcker Rule, which will forbid proprietary trading, whatever that is, will be finalized next week. No one knows what it says but there are lots of guesses. Today's leak about the final rule is that it will not allow "portfolio hedging," whatever that is; you'll have to hedge trade by trade or something. Which sounds terrible. That said, eliminating the words "portfolio hedging" is not the same as eliminating portfolio hedging. The rule allows hedges "designed to reduce or otherwise significantly mitigate ... one or more identifiable risks," as long as they don't create "any significant new or additional risk that is not itself hedged contemporaneously." So it is not entirely clear to me from that that the rule forbids "portfolio hedging"? Like, you got a portfolio, you identify a risk in the portfolio, etc. It may forbid London-Whale-style, "I know there's a hedge in here somewhere" hedges but that's not quite the same thing.

China doesn't like Bitcoin

China has banned its banks from dealing in bitcoins, presumably because bitcoins seem to have found their main practical use as a way to evade China's capital controls. That and buying drugs and guns and credit cards and murders and so forth online. But the Chinese central bank dresses up those reasons in delightful euphemism, planning to "guide people to correctly understand the concept of a currency as well as investment theory," which is a nice goal.

Inflation hawks, doves, ducks

Here is a Billfold post titled "What 'DuckTales' Taught Me About Inflation" so that is a thing that is happening. (The answer appears to be that DuckTales provides sufficient background to be an inflation crank on the Internet -- "print money and we'll have Weimar!!!" -- though the writer here went on to learn some macro in non-cartoon-duck settings and is not himself a crank.) I don't remember a second of "DuckTales," except the Scrooge-McDuck-diving-into-a-pool-of-money thing, but I have this odd sense that it was incredibly important to my intellectual development. Anyway, "DuckTales," inflation, go nuts really.

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    Matthew S Levine at mlevine51@bloomberg.net

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