Levine on Wall Street: Francs, Banks and Mergers
Maybe skip that trip to Switzerland.
The Swiss National Bank had capped the franc at 1.20 to the euro until today, when it abandoned the cap, and the franc strengthened to 85.17 centimes per euro before the euro bounced back a bit. "Not one of 22 economists surveyed by Bloomberg News between Jan. 9 and Jan. 14 expected the SNB to get rid of its cap in 2015," oops. Neither did anyone else really, though. For instance, "Swiss telecoms group Sunrise yesterday set out plans to raise SFr1.35bn in an all-primary IPO, which at the time equated to US$1.325bn," but which now equates to a rather more expensive telecoms group, leaving the underwriters in an awkward place. If you live in Poland and have a mortgage denominated in Swiss francs, you're in an even more awkward place. Swiss exporters are also surprised and sad. And "Forget Emerging Markets. Hot Topic at Davos 2015 Is the U.S.," says this headline, though I suppose even among the global super-rich "can you believe how much this Coke costs?" will be a topic with some traction next week.
Here's the statement from the SNB, which also lowered deposit rates from -0.25 percent to -0.75 percent and the Libor target to a range of -1.25 to -0.25 percent (from -0.75 to -0.25 percent). This obviously did not do much to keep down the franc, but the SNB also said that "if necessary," it would "remain active in the foreign exchange market to influence monetary conditions," which might have happened already, given the bounce off today's highs. FT Alphaville collects some interesting reactions, including JPMorgan making the point that the SNB's CHF 38 billion profit in 2014 will "provide a sizeable cushion against the mark-to-market losses the SNB will suffer on its reserve portfolio (the SNB would have been bankrupted by this de-pegging had it not made such a large profit last year)." The timing may also have to do with this week's European Court of Justice ruling clearing the way for more sovereign-bond purchases by the European Central Bank, further easing monetary conditions in the Eurozone and making it hard for the Swiss to keep up.
Elsewhere in foreign exchange, "Russia will unseal its $88 billion Reserve Fund and use it to acquire rubles," and wouldn't it be nice if that fund was all Swiss francs? And there are "new signs of potential wrongdoing" in the FX-manipulation probes that were sort-of settled last November. I said then that the FX manipulation looked like just "tinkering at the edges of real supply and demand." Perhaps the newly discovered stuff is worse, but still. The Swiss news sort of puts private-sector FX manipulation in perspective.
Banks banks banks banks.
Citigroup earnings are out at 8 a.m., get excited. Or be gloomy, if you want, since JPMorgan's miss yesterday is perhaps not a great sign for the other big banks. Obviously on yesterday's earnings call Jamie Dimon was pretty Jamie Dimon-y, "said overlapping efforts by U.S. regulators place banks 'under assault,'" criticized capital regulation, said that JPMorgan is "as sound as it gets," threatened that regulation might cause U.S. banks to lose their global position to China, and generally seems to have recovered from the bouts of humility that he suffered after the London Whale and the mortgage settlements. By my Jamie Dimon "_____ Days Without a Multibillion-Dollar Embarrassment" counter, I think that means we're due. (Meanwhile in overlapping regulators, a group of "more than 15 attorneys general" is bugging JPMorgan for more information about its computer security breach last year.)
Dimon also pushed back on the idea that JPMorgan should be broken up. Here is Peter Eavis making the case for that again, and Mike Mayo says that "the topic of a JPM breakup stays on the table, especially after a quarter where they had lousy efficiency relative to last quarter and year." (And here, somehow, John Carney makes a "Tale of Two Cities" reference to JPMorgan that is not about the breakup arguments.) This idea is catching; Deutsche Bank is reportedly considering splitting off its retail division for, basically, regulatory purposes. On the other hand, Brian Moynihan gets to continue being chairman of Bank of America, as an activist investor "said it is withdrawing a shareholder resolution that called for Bank of America to have an independent board chair."
Elsewhere, unfathomably, "Finding a Chase ATM is getting harder," which I guess means that there are only four of them in the room with you right now, down from five last quarter.
Some mergers and acquisitions news and non-news.
Remember the glory days of BlackBerry Ltd., by which I mean the last 20 minutes of trading yesterday, when it was up almost 30 percent on news that it was in talks to be bought by Samsung? It wasn't. Or, at least, it says it wasn't, in a press release that appears just below "BlackBerry Classic: Familiar QWERTY Design Packs High-Performance Features" on the BlackBerry website. Here is why Samsung might want to buy BlackBerry; mainly, Samsung is good at making phones that people buy, but not so hot at mobile security, and BlackBerry is the opposite.
Elsewhere, Institutional Shareholder Services came down in favor of the Family Dollar/Dollar Tree merger, despite Dollar General's higher but riskier and still somewhat in limbo offer. The vote is next Thursday, so I guess that still gives us a week for more clarity and/or a higher bid from the General.
And some stock-based lending.
"Continental Resources Inc said that Harold Hamm, its chief executive officer and majority shareholder, has pledged about one-fourth of the company shares he owns as collateral for a personal loan, according to a regulatory filing." Here is the filing. That's about $2.6 billion worth of stock. "The document did not state the purpose nor the terms of the loan, how much Hamm borrowed or who lent him the money," but you can guess! Here is a copy of the check for $974,790,317.77 that Hamm sent his ex-wife in their divorce case, drawn on a trust account at Morgan Stanley. (Hamm appears to own his Continental shares through that trust.) So ... I feel like even billionaires don't keep that much money in their checking accounts? (Or keep their checking accounts at Morgan Stanley?) Figure $2.6 billion of stock, 40 percent LTV, a bit of fees, yeah, makes sense.
And some swaps reporting.
The Securities and Exchange Commission announced new rules "that will require security-based swap data repositories (SDRs) to register with the SEC and prescribe reporting and public dissemination requirements for security-based swap transaction data." The public reporting deadline is "within 24 hours," which is somewhat controversial:
Dennis Kelleher, chief executive officer of Better Markets, which advocates for more stringent financial regulation, said “a 24-hour trade reporting delay is a 19th-century, horse-and-buggy standard for 21st century markets that move faster than the speed of light.”
I've said this before, but if financial innovation actually leads to faster-than-light travel, then we should embrace it. All of the arguments about the high-frequency trading "arms race" being socially wasteful will look ridiculous if it leads to two-hour flights to Mars. Anyway yeah 24 hours is obviously too slow for real-time price transparency, though I guess if you're paying attention it will let you know retrospectively whether you were ripped off yesterday.
And you think your year-end review is bad.
Maybe apply to work at Rikers Island:
Candidates are supposed to be rated from 1 to 5, but multiple officials, including the deputy commissioner in charge of hiring, were unable to tell investigators if 1 or 5 was the high score. The report found 90 percent of applicants were given a 3.
That's what you would do too, right? Like, instead of ask which was which?
The social networks.
"'Facebook At Work' Hits App Stores," says this headline, and if you read any further then you and I are very different people. On the other hand, "How Twitter Is Disrupting Shareholder Activism" might be worth a look; I cannot exactly recommend its conclusions ("Shareholders who would never rationally read a 300-page proxy statement might respond to a 140-character tweet," "Whether shareholder democracy is good or bad is an immensely personal and political question"), but the footnotes veer pleasingly into the absurd:
The gadfly is a tiny fly that annoys horses. The name also refers to a person who upsets the status quo. But this humble creature has also been honored by several Soviet films, operas and musicals. It is also Cheerful-class screw gunboat in the British Royal Navy.
Sure why not.
The guy played by Jonah Hill in "The Wolf of Wall Street" is in trouble with the feds again. The movie of "The Big Short" will star Brad Pitt, Christian Bale and Ryan Gosling. "Flash Boys" heroes IEX have a new order type. Caesars Entertainment put a unit in bankruptcy in Chicago. Ariane de Rothschild will take over from Christophe de Backer as chief executive of Edmond de Rothschild Group. Blackstone is marketing the first home rental securitization of 2015. What should the left understand about finance? PR firm opposes buzzwords, sure. Look smarter by wearing glasses or using a middle initial, but not by "moving faster than others around" you, apparently that doesn't work. Wall Street Intern Posts Nude Selfies From Bank's Bathroom, Then Quits Job To Pursue Career In Porn. Choire Sicha has an advice column.
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