Weil on Finance: Meet Sam the Wealth Addict
Greetings, dear readers. Here are your morning links.
Michael Lewis occasionally has bemoaned how college kids have read his Wall Street tell-all book "Liar's Poker" as a how-to manual. Here's one who did: Sam Polk, a self-described "wealth addict" who spilled his guts in a New York Times article about his former life as a derivatives trader. "In my last year on Wall Street my bonus was $3.6 million — and I was angry because it wasn't big enough," he begins. He's lucky he could function at all: "While I was competitive and ambitious — a wrestler at Columbia University — I was also a daily drinker and pot smoker and a regular user of cocaine, Ritalin and ecstasy. I had a propensity for self-destruction that had resulted in my getting suspended from Columbia for burglary, arrested twice and fired from an Internet company for fistfighting."
Here's a new academic study that got some attention over the weekend, by professors at New York University and the European School of Management and Technology in Berlin. They estimated that European banks have a capital shortfall of as much as 767 billion euros ($1.04 trillion) heading into this year's asset-quality review by the European Central Bank.
OK, so Deutsche Bank posted a 1 billion euro net loss for the fourth quarter. That was a surprise, but not exactly a shock. This, however, was a stunner: The Wall Street Journal over the weekend ran a story under the headline, "Deutsche Bank Considers Issuing Profit Warning," which cited unnamed people familiar with the matter who said the bank "is likely to tell investors in coming days that its fourth-quarter results will fall short of expectations." Deutsche Bank had been scheduled to release its results on Jan. 29. After the story broke, the bank moved up the release by 10 days. How in the world does a story like this leak? I have no idea. This isn't the way investor-relations departments usually operate. And if the leak was unauthorized, there may be more turmoil inside of Deutsche Bank than anyone could have ever imagined before.
From the department of odd correlations, here's an article about fracking and bonds .
This time the unintended consequence is a benefit. Rising U.S. oil production means lower inflation, which is good for government bonds. From Daniel Kruger of Bloomberg News: "With the U.S. economy relying less on oil and gas imports than at any time in two decades, energy expenses for Americans have fallen and cut into inflation more than any other living cost in the past year, according to data compiled by the Labor Department. Economists say consumer prices will rise less than 2 percent for a second straight year in 2014, the first time that's happened during an expansion in a half-century. Slowing inflation, which increases the purchasing power of fixed-rate payments, would give support to Treasuries after the Federal Reserve's plan to curtail its unprecedented bond buying ignited their first annual losses since 2009."
So I guess that means everyone should go hug a squirrel.
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Jonathan Weil at firstname.lastname@example.org