Thought For The Day
If the proprietary trading departments of major investment firms are sold to others, the others may get the surprise of their lives.
If the huge profits of these departments were made up almost completely by the mark up of junk OTC derivatives, compliments of the FASB, these master traders could bust their new owners or put them to sleep.
Could a buyer be that stupid? Absolutely.
Jim Sinclair’s Commentary
The reason for the huge bonuses of 2009 and 2010 is because it was the last dip at the well, maybe for a decade, based on paper profits from junk OTC derivative mark ups.
Wall Street Firms to Cut 80,000 Jobs in 18 Months, Whitney Says
By Yalman Onaran – Sep 7, 2010 1:55 PM MT
Securities firms around the world will cut as many as 80,000 jobs in the next 18 months as revenue growth begins to slow, said Meredith Whitney, the former Oppenheimer & Co. analyst who now runs her own firm.
The reductions, about 10 percent of current levels, will come after 2010 compensation payments, Whitney, 40, said in a report dated Aug. 31 and obtained by Bloomberg News today. The industry’s payouts will be “down dramatically,” said Whitney, who started New York-based Meredith Whitney Group after correctly predicting Citigroup Inc.’s dividend cut in 2007.
“The key product drivers of Wall Street’s revenues and profits over the past decade have been in a structural decline over the past three years,” Whitney said in the report. “2010 marks the first year in many in which Wall Street-centric firms will go through structural changes.”
Barclays Plc, Credit Suisse Group AG and Royal Bank of Scotland Group Plc may lead a slowdown in hiring in Europe as the fixed-income trading boom fizzles out, recruiters said last month. Barclays Capital’s income from trading bonds and commodities fell 40 percent in the first half amid the sovereign debt crisis. Fixed-income, currencies and commodities trading was the biggest revenue contributor at investment banks from Deutsche Bank AG to Goldman Sachs Group Inc.
While regulatory reform, including higher capital requirements, will force some of these shifts, there will be a “deeper secular change” due to declining revenue in businesses such as securitization, Whitney wrote.
Jim Sinclair’s Commentary
When you are the president’s brother you have financial clout others do not.
Afghan security forces beat angry customers to prevent run on Kabul Bank
Afghanistan’s biggest bank, caught in a corruption scandal, closes all its branches bar one just before Muslim holiday
Wednesday 8 September 2010 15.47 BST
Afghan security forces used batons on unruly customers scrambling to withdraw their savings today from the country’s biggest bank, which is mired in a scandal of corruption and mismanagement.
Kabul Bank’s troubles have threatened to add a financial crisis to Afghanistan’s other woes, with military and civilian casualties at record levels as a Taliban-led insurgency grows ahead of parliamentary elections on 18 September.
Officers from the National Security Directorate struggled to maintain control of up to 200 people outside one branch in the capital as desperate customers tried to take out money ahead of a three-day Muslim holiday.
The crisis developed after the company’s top two directors resigned amid allegations of corruption.
Corruption is a common complaint among ordinary Afghans and Washington fears graft is boosting the insurgency and complicating efforts to strengthen government control so foreign troops can hand over to Afghan security forces – whose salaries are paid through Kabul Bank.
Jim Sinclair’s Commentary
The US dollar is teetering on the edge of a really ugly technical formation.
This time the round number of .8000 is not critical, but instead meaningless.
An approach to .8000 only means that .7200 and the old lows are coming into play.
Jim Sinclair’s Commentary
Asia rises as the West wallows in their own monetary sin.
Yuan Trading Against Russian Ruble Said to Start Within Weeks in Shanghai
By Artyom Danielyan and Emma O’Brien – Sep 8, 2010 4:54 AM MT
China and Russia plan to start trading in each other’s currencies as the world’s second-biggest energy consumer and the largest energy supplier seek to diminish the dollar’s role in global trade.
China may start trading its currency against the ruble within weeks, three bankers with knowledge of the matter told Bloomberg, and sent out a document last week allowing lenders to apply for ruble trading licenses, one of them said. Russia’s Micex Stock Exchange is making preparations to trade the ruble against the yuan in an initiative that has the backing of the country’s central bank, Ruben Aganbegyan, the head of the bourse, told reporters at a conference in Moscow today.
“Given the risk to the dollar and U.S. assets from their fiscal position they want to reduce their dependence on the dollar as an invoicing currency,” Bhanu Baweja, global head of emerging markets fixed income, currency and credit research at UBS AG, said in a phone interview from London. “It makes sense for two large economies to exclude a third, overly dominant economy from their trading equation.”
In the wake of the global financial crisis, which forced the U.S. economy into recession, both China and Russia have called for the dollar’s role in the financial system to be diluted. Volatility in major currencies is putting the global recovery at risk Zhang Ping, the head of China’s National Development and Reform Commission, said last month. President Dmitry Medvedev last year suggested Russia, holder of the world’s third-largest foreign-currency reserves, reduce its holdings of dollar.
Jim Sinclair’s Commentary
If this had been done by a human it would be considered a clear attempt to manipulate price defined as causing an impact on price without taking a risk.
When an international investment banker uses a computer to do this it is considered a positive event for exchange volume.
SEC confirms ‘quote stuffing’ probe.
The SEC’s Mary Schapiro confirmed the agency is looking into "quote stuffing," the practice of placing an unusually large number of buy or sell orders for stocks in a fraction of a second, and then canceling the orders almost immediately. Schapiro said the SEC is considering requiring traders to hold orders open for minimum periods, and signaled more broadly that high-frequency traders will face new curbs in the aftermath of May’s flash crash.
Jim Sinclair’s Commentary
He will go to Hell for this.
Fed’s Move to Buy Treasurys Posing Serious Risks: Mishkin
By: Jeff Cox
CNBC.com Staff Writer
The Federal Reserve’s decision last month to step up its buying of Treasury securities could be laying the groundwork for inflation and a host of other political and economic troubles, former Fed governor Frederic Mishkin told CNBC.
In a rare public dissent with the central bank, Mishkin, a professor at Columbia Business School who left the central bank in 2008, called the Fed’s move to use receipts from maturing mortgage-backed securities to buy more Treasurys "one of the most important decisions the Fed has made in a very long time."
The purchases of long-term government debt—expected to total about half a trillion dollars—should be accompanied by an exit strategy, he said.
"When you hold a lot of long-term debt on your balance sheet, you’re now exposed to a lot of interest rate risks," Mishkin said in a live interview. "All of a sudden you could be booking losses. Think about the screams in Congress about all of this."
Jim Sinclair’s Commentary
Look how spin attempts to legitimize the flavor of the year, Credit Default Swaps, OTC weapons of mass financial destruction.
Sure they will work as long as no entity needs them to function.
Jim Sinclair’s Commentary
Please keep in mind governments do not default. They reschedule and declare the problem solved.
Beware of Greeks Bearing Bonds
As Wall Street hangs on the question “Will Greece default?,” the author heads for riot-stricken Athens, and for the mysterious Vatopaidi monastery, which brought down the last government, laying bare the country’s economic insanity. But beyond a $1.2 trillion debt (roughly a quarter-million dollars for each working adult), there is a more frightening deficit. After systematically looting their own treasury, in a breathtaking binge of tax evasion, bribery, and creative accounting spurred on by Goldman Sachs, Greeks are sure of one thing: they can’t trust their fellow Greeks.
By Michael Lewis
After an hour on a plane, two in a taxi, three on a decrepit ferry, and then four more on buses driven madly along the tops of sheer cliffs by Greeks on cell phones, I rolled up to the front door of the vast and remote monastery. The spit of land poking into the Aegean Sea felt like the end of the earth, and just as silent. It was late afternoon, and the monks were either praying or napping, but one remained on duty at the guard booth, to greet visitors. He guided me along with seven Greek pilgrims to an ancient dormitory, beautifully restored, where two more solicitous monks offered ouzo, pastries, and keys to cells. I sensed something missing, and then realized: no one had asked for a credit card. The monastery was not merely efficient but free. One of the monks then said the next event would be the church service: Vespers. The next event, it will emerge, will almost always be a church service. There were 37 different chapels inside the monastery’s walls; finding the service is going to be like finding Waldo, I thought.
“Which church?” I asked the monk.
“Just follow the monks after they rise,” he said. Then he looked me up and down more closely. He wore an impossibly long and wild black beard, long black robes, a monk’s cap, and prayer beads. I wore white running shoes, light khakis, a mauve Brooks Brothers shirt, and carried a plastic laundry bag that said eagles palace hotel in giant letters on the side. “Why have you come?” he asked.
