Thursday, February 28, 2013

Jamie Dimon: That's why I'm richer than you

FORTUNE -- At JPMorgan Chase's annual investor day on Tuesday, CEO Jamie Dimon answered one analyst's question by saying, "That's why I'm richer than you."
Zing. The line got a bunch of laughs. And it quickly became a headline for articles recounting the Q and lack of A between Dimon and the Credit Agricole analyst Mike Mayo, who has the reputation of being one of the few analysts to be tough on Wall Street CEOs.
But what did Dimon mean by it? Mayo's question was about bank capital. European regulators are requiring banks there to hold more capital than U.S. rivals. Mayo wanted to know if that would give those banks, in this case UBS, an advantage over JPMorgan (JPM) in attracting clients who want a safe place for their money.
- See more at: At a J.P. Morgan investor event this week Mike Mayo, an analyst at CLSA, who has been a critic of large banks and, at times, Dimon, asked if J.P. Morgan wasn’t at a competitive disadvantage compared to more highly capitalized peers.

Mayo: I think what I hear UBS saying in the presentation is that if I’m an affluent customer I’ll feel a lot better going to UBS if they have 13.5 (percent) capital ratio than another big bank with a 10 percent ratio. Do you agree with that?

Dimon: You would go to UBS and not JPMorgan?

Mayo: I didn’t say that. That’s their argument.

Dimon: That’s why I’m richer than you.

GBP worst performing currency this year

On the heels of Abe's final decision to appoint a somewhat middle-of-the-road 'dove' as BoJ Governor, we thought it appropriate to look at the year's FX performance to see who is 'winning' the currency wars so far this year. The answer may surprise you (or not if you had read this or this).
GBP (blue) is the 'worst'-performing currency versus the USD this year - having overtaken the JPY in the last two days...higher on the chart below is USD strength

Interestingly, given US equity performance YTD, the USD is 2.25% stronger on the year against a broad basket of currencies.

The USD is 'seasonally' strong in Q1 on average over the past 30 years but this rise is quite remarkable relative to that average and we can only imagine what impact this will have on corporate earnings for Q1 as the S&P 500's 46% overseas revenues gets notched down on the income statement.
Charts: Bloomberg

Wednesday, February 27, 2013

Asking the right questions about Italy

Basically Berlusconi represents a return to Nationalism and a repudiation of the measures imposed upon Italy by Berlin/Brussels (The European Union). Grillo represents something stronger which is a total rejection of Berlin/Brussels (The European Union) and a demand that Italy return to self-governance.  Grillo’s party won more votes than any other party and taken together, Berlusconi’s coalition and the 5 Star Party won the vast majority of votes at just under sixty percent. Yes, there are other national issues such as corruption and nepotism and so forth that relate strictly to the political situation in Italy but again, these are the small questions and far less significant to the central question of what will happen to the European Union as a result of the vote of the Italian people.
I first direct your consideration to this; if it can happen in Italy then why not in Greece, Spain, Portugal or France? People in other countries will take heart from Grillo’s attempt and then success and the mob may begin to stir. However Italy is going to work out and whatever alliances may be made or whether there will be a second vote; the writing is emblazoned now clearly on the wall which declares opposition to living under the dictums handed down from other countries and enforced by the money that may or not be parceled out to the Italian nation. This is clearly defined by the total rejection of Monti and the Brussels/Berlin austerity measures that he put in place. The vote for Monti at just under ten percent is a ringing condemnation of the European Union by the people of Italy. In fact I would say that the Italian elections are exactly what the European Union has feared most, the very most, which is the rejection of the Brussels/Berlin governance by those who ultimately matter which are the people of a nation. I think it can now be said with a good degree of accuracy that the Italian people took a long hard look at the European Union and voted, “NO!”
What most people have not grasped yet, but the dawning will come, is that a Referendum has just taken place in Italy. All of the political upheaval in Italy was caused by anger and frustration with the European Union and their policies. This is what drove the election and not to appreciate this is a serious mistake. The EU is now cornered. This is the third largest nation in the Union and the voters, the people, have just turned out a majority that clearly and resolutely said “Basta!” (Enough!). I would say that how all of any of this works itself out is anyone’s guess now but I would also say that what has happened, like a wife catching her husband with another woman, will forever change the relationship. If the bureaucrats and technocrats in Brussels wanted to know what Dante’s Inferno looked like they have only to pay attention this morning. They can stare at it now.

Tuesday, February 26, 2013

Fed Faces Explaining Billion-Dollar Losses in QE Exit Stress

Federal Reserve Chairman Ben S. Bernanke’s efforts to rescue the economy could result in more than a half trillion dollars of paper losses on the central bank’s books if interest rates rise abruptly from recent levels.

Monday, February 25, 2013

Greece Likely to Exit Euro This Year, FX Concept’s Taylor Says

Greece will probably leave the euro as soon as next month as the government runs out of cash and European institutions fail to lend more to the nation, according to John Taylor of hedge fund FX Concepts LLC.
“This summer I think is very likely,” Taylor, founder and chief executive officer of FX Concepts in New York, said today in an interview on Bloomberg Television’s “Inside Track” with Erik Schatzker and Sara Eisen. “The Europeans aren’t going to give them the money, the International Monetary Fund’s not going to give them an OK. They will be out of money in June.”

Friday, February 22, 2013

Bank of England closes in on China currency deal

Sir Mervyn King, Governor of the Bank of England, is on the brink of striking a deal with the People's Bank of China which would cement the UK's role as the leading G7 trade hub for the world's fastest growing currency.

Wednesday, February 20, 2013

Japan trade deficit hits record as yen weakens

Japan's monthly trade deficit hit a record in January after its recent aggressive monetary policy stance weakened its currency sharply.
Exports rose in January, the first jump in eight months, as its goods became more affordable to foreign buyers.
However, a weak currency also pushed up its import bill resulting in a monthly trade deficit of 1.6tn yen ($17.1bn; £11.1bn), a 10% jump from a year ago.

EES: Currency Wars Heat Up With G20 Meeting

The G20 recently met to discuss the so called "Currency Wars" orcompetitive devaluation of domestic currencies by central banks.

Tuesday, February 19, 2013

Iceland Foreshadows Death of Currencies Lost in Crisis - Bloomberg

Iceland is hinting its currency may be too small to survive in the volatile world left behind by the global financial crisis.
Less than five months after Finance Minister Katrin Juliusdottir said the krona probably will never be restored to a free floating regime, central bank Governor Mar Gudmundsson is signaling the same.

Monday, February 18, 2013

Saxo Bank CEO Says Euro Is Doomed as Currency Woes Resurface

Lars Seier Christensen, co-chief executive officer of Danish bank Saxo Bank A/S, said the euro’s recent rally is illusory and the shared currency is set to fail because the continent hasn’t supported it with a fiscal union.
“The whole thing is doomed,” Christensen said yesterday in an interview at the bank’s Dubai office. “Right now we’re in one of those fake solutions where people think that the problem is contained or being addressed, which it isn’t at all.”

G-20 Takes Harder Line on Currencies

Group of 20 finance chiefs sharpened their stance against governments trying to influence exchange rates as they sought to tame speculation of a global currency war without singling out Japan for criticism.
Two days of talks between G-20 finance ministers and central bankers ended in Moscow yesterday with a pledge not to “target our exchange rates for competitive purposes,” according to a statement. That’s stronger than their position three months ago and leaves Japanese officials under pressure to stop publicly giving guidance on their currency’s value.

Sunday, February 17, 2013

Why Bankers Rule the World - It’s the Interest

In the 2012 edition of Occupy Money released last week, Professor Margrit Kennedy writes that a stunning 35% to 40% of everything we buy goes to interest. This interest goes to bankers, financiers, and bondholders, who take a 35% to 40% cut of our GDP. That helps explain how wealth is systematically transferred from Main Street to Wall Street. The rich get progressively richer at the expense of the poor, not just because of “Wall Street greed” but because of the inexorable mathematics of our private banking system.

Friday, February 15, 2013

EES: The Best Way To Trade The Currency Wars - Buy Gold Yen

So what's the best way to trade the currency wars, and to go long gold?
The simple answer is to be long gold/yen, or XAU/JPY. On a day like today when gold is down, instead of buying the normal XAU/USD which is what most investors would do, the best way to play both the JPY decline and potential rise in gold is to go long XAU and short JPY. It's possible to buy Gold against major currencies now and even some exotics.

Thursday, February 14, 2013

EU Seeks Broad Transaction Tax

The European Union proposed a tax on financial transactions that could be collected worldwide as soon as the start of next year by the 11 nations that have so far signed up to participate.
The proposal, which marks a new stage in the EU’s efforts to raise revenue from the financial industry, came under immediate fire from banking groups. The EU plan would harm the German economy as a whole, eight lobby groups that represent industries ranging from the commercial country’s banks to skilled tradesmen said in a joint statement today.
The EU plan invokes “residence” and “issuance” ties to firms in participating countries, in a bid to prevent traders from escaping the levy by trading outside the tax’s zone, according to the proposal unveiled by EU Tax Commissioner Algirdas Semeta today in Brussels. To escape the proposed tax entirely, firms in other nations would have to entirely cease financial-services business with the 11 nations involved, according to the EU.
With the proposal, the EU is trying to curb what it sees as a “patchwork” of local levies. Like a prior, failed proposal for all 27 EU nations, today’s plan would set a rate of 0.1 percent for stock and bond trades and 0.01 percent on derivatives trades.
The EU estimates the arrangement could raise 30 billion euros ($40 billion) to 35 billion euros per year. To become law, the proposal has to be approved by the nations that agree to participate. They now comprise Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia. All 27 EU nations can sit in on the talks and have the option to join.

Monday, February 11, 2013

Putin goes long Gold

When Vladimir Putin says the U.S. is endangering the global economy by abusing its dollar monopoly, he’s not just talking. He’s betting on it.
Not only has Putin made Russia the world’s largest oil producer, he’s also made it the biggest gold buyer. His central bank has added 570 metric tons of the metal in the past decade, a quarter more than runner-up China, according to IMF data compiled by Bloomberg. The added gold is also almost triple the weight of the Statue of Liberty.

Berlusconi is Back, and So Is the Eurozone Debt Crisis

Since the beginning of the year, the markets have been behaving as if the Eurozone debt crisis has been magically solved.
Yields on Spanish and Italian debt are trading more than 1% lower than at their peak, while world stock markets have soared close to all-time highs.
Unfortunately, you can expect that all of this euphoria will fade when the Italian elections take place on February 23-24.
Why?...It's summed up in two words: Silvio Berlusconi.
That's because until recently a win by the former Prime Minister wasn't seen as very likely. Not long ago, The EU establishment believed they had the Italian elections completely wired.
The socialist "Democratic party" led by Pier Luigi Bersani was expected to win and be supported by a coalition of center parties led by the EU's favorite, Mario Monti, imposed as prime minister in November 2011.
Both of these candidates were safely pro-euro, and prepared to put Italy through a fair amount of "austerity" to keep it, provided the handouts kept flowing from Germany and the European Central Bank. The status quo wouldn't be threatened.
Meanwhile, the two anti-euro candidates were supposed to be comedians.  
One is an actual comedian named Beppe Grillo, leading an eccentric "Five Star Movement," while the other  is the aforementioned Silvio Berlusconi, who is currently under indictment for sex with under-age prostitutes and therefore (in the eyes of the EU bureaucracy) not seen as a serious threat.
At best it was thought Berlusconi and Grillo might get as much as 30% of the vote between them, but it wouldn't give them any significant power. 
Well, let's just say things have changed.

Thursday, February 7, 2013

Bofa: Get Cash for storm

In what may be the first full digital storm panic, federal, state and business officials worried about the snow headed for the Mid-Atlantic and Northeast have taken to Twitter warn that a potential disaster is coming.
Bank of America led the frenzy. "Winter Storm #Nemo may bring 2 feet of #snow to New England late Fri & Sat. Prepare now - make sure you have plenty of cash on hand."

Sucker Alert? Insider Selling Surges After Dow 14,000

Insiders have been pulling out of stocks just as small investors are getting in.
Selling by corporate executives has surged recently as the Dow Jones Industrial Average hit 14,000 and retail investors flooded into stocks. The amount of insider selling has usually preceded market selloffs.
There have been more than nine insider sales for every one buy over the past week among NYSE stocks, according to Vickers. The last time executives sold their company's stock this aggressively was in early 2012, just before the S&P 500 went on to correct by 10 percent to its low for the year.
"Insiders know more than the vast majority of market participants," said Enis Taner, global macro editor for "And they're usually right over a long period of time."

A MASSIVE Bearish Bet Against Banks Has Traders Buzzing

According to Barron's columnist Steven Sears, someone made a big bet against the financials ETF yesterday (ticker symbol XLF), and it has everybody buzzing.
The trader bought 100,000 put options on the ETF (a put option increases in value when the price of the underlying asset, in this case, the ETF, goes down).
To put that number in perspective, Sears writes, "Few investors ever trade more than 500 contracts, so a 100,000 order tends to stop traffic and prompt all sorts of speculation about what's motivating the trade." According to Sears, the trade "has sparked conversations across the market."
The trade makes money if the ETF drops below $16. It's trading just north of $17.50 today.
While the bet has everyone scratching their heads, Sears offers one possible explanation: bank stocks have been on a tear lately, so it make sense for someone who own bank stocks to hedge against a reversal by purchasing put options on the ETF that tracks bank stocks.
However, Sears says a trader trying to hedge against a short-term reversal didn't need to set up the trade this way:
To be sure, it makes perfect sense to hedge a hot fund like the financial sector SPDR. The fund has surged this year, and gained about 7.2%. But if the mystery hedger was simply concerned the financial sector exchange-traded fund would retreat from its 52-week high of 17.66, which is reasonable, there are shorter-term hedges. For instance, he could have bought puts that expire no later than March, because they would be more sensitive to near-term changes.
By choosing April puts, the mystery investor has some traders concerned that they, along with the majority of investors, are too optimistic ahead of the coming budget fight.

Read more:

Wednesday, February 6, 2013

Federal Reserve hacked

Federal Reserve hacked

US central bank confirms intrusion after hacktivist group Anonymous was claimed to have stolen 4,000 bankers' details

The US Federal Reserve bank has confirmed one of its internal websites was broken into by hackers after the hacktivist group Anonymous was claimed to have stolen details of more than 4,000 bank executives.
"The Federal Reserve system is aware that information was obtained by exploiting a temporary vulnerability in a website vendor product," a spokeswoman for the US central bank said.
"Exposure was fixed shortly after discovery and is no longer an issue. This incident did not affect critical operations of the Federal Reserve system," the spokeswoman said, adding that all individuals affected by the breach had been contacted.
The admission follows a claim that hackers linked to Anonymous struck the bank on Sunday. The technology news site ZDNet separately reported that Anonymous appeared to have published information said to containing the login information, credentials, internet protocol addresses and contact information of more than 4,000 US bankers. 

Virginia moves closer to creating state’s own currency Read more:

Lawmakers in Virginia say they want to keep their options open in case the value of the U.S. dollar ever collapses — so they’re considering minting state coinage.

Read more:

Tuesday, February 5, 2013

Congress eyes tax on pot

SEATTLE (AP) - An effort is building in Congress to change U.S. marijuana laws, including moves to legalize the industrial production of hemp and establish a hefty federal pot tax.
While passage this year could be a longshot, lawmakers from both parties have been quietly working on several bills, the first of which Democratic Reps. Earl Blumenauer of Oregon and Jared Polis of Colorado plan to introduce Tuesday, Blumenauer told The Associated Press.
Polis' measure would regulate marijuana the way the federal government handles alcohol: In states that legalize pot, growers would have to obtain a federal permit. Oversight of marijuana would be removed from the Drug Enforcement Administration and given to the newly renamed Bureau of Alcohol, Tobacco, Marijuana and Firearms, and it would remain illegal to bring marijuana from a state where it's legal to one where it isn't.
The bill is based on a legalization measure previously pushed by former Reps. Barney Frank of Massachusetts and Ron Paul of Texas.
SEATTLE (AP) — An effort is building in Congress to change U.S. marijuana laws, including moves to legalize the industrial production of hemp and establish a hefty federal pot tax.
While passage this year could be a longshot, lawmakers from both parties have been quietly working on several bills, the first of which Democratic Reps. Earl Blumenauer of Oregon and Jared Polis of Colorado plan to introduce Tuesday, Blumenauer told The Associated Press.
Polis’ measure would regulate marijuana the way the federal government handles alcohol: In states that legalize pot, growers would have to obtain a federal permit. Oversight of marijuana would be removed from the Drug Enforcement Administration and given to the newly renamed Bureau of Alcohol, Tobacco, Marijuana and Firearms, and it would remain illegal to bring marijuana from a state where it’s legal to one where it isn’t.

Greed is driving the market

CNN's fear and greed index 

Monday, February 4, 2013

The Bernanke Shock, Where is Germany's Gold?

The financial world was shocked this month by a demand from Germany's Bundesbank to repatriate a large portion of its gold reserves held abroad. By 2020, Germany wants 50% of its total gold reserves back in Frankfurt - including 300 tons from the Federal Reserve. The Bundesbank's announcement comes just three months after the Fed refused to submit to an audit of its holdings on Germany's behalf. One cannot help but wonder if the refusal triggered the demand.

Either way, Germany appears to be waking up to a reality for which central banks around the world have been preparing: the dollar is no longer the world's safe-haven asset and the US government is no longer a trustworthy banker for foreign nations. It looks like their fears are well-grounded, given the Fed's seeming inability to return what is legally Germany's gold in a timely manner. Germany is a developed and powerful nation with the second largest gold reserves in the world. If they can't rely on Washington to keep its promises, who can?

EES: Did MJNA get too high?

Our recent article covering Medical Marijuana (MJNA.PK) was written when the price was .20. Currently the price is .45 and it's up over 240% sincewe started recommending buying it. Obviously, this is a huge move, and is cause for analysis.

Euro crisis not over, says Wolfgang Schaeuble

Europe’s political tremors risk spoiling the region’s market calm, with corruption allegations buffeting Spanish Premier Mariano Rajoy and Italy’s Silvio Berlusconi narrowing the front-runner’s lead as elections loom.

Rajoy, facing opposition calls to resign amid contested reports about illegal payments, traveled to Berlin today as euro-area leaders schedule a flurry of meetings this week ahead of a Feb. 7-8 European Union summit. Last week’s nationalization of the Netherlands’ fourth-largest bank and a 2.17 billion-euro ($3 billion) loss at Deutsche Bank AG underscore the fragile economic health in the region.
“The euro crisis is not over,” German Finance MinisterWolfgang Schaeuble said Feb. 1 at the Munich Security Conference where fellow panelists included Deutsche Bank co-Chief Executive Officer Anshu Jain. Still, “we’re in a much better position than we were a year ago,” the minister said.

FTC investigating Herbalife

Somewhere, Bill Ackman is smiling.
Herbalife Ltd. HLF -4.70% shares dropped as much as 12% Monday morning after The New York Post reported the nutrition company may be under investigation by the Federal Trade Commission. The publication cited documents obtained via the Freedom on Information Law. The Wall Street Journal reported last month that officials at the Securities and Exchange Commission have opened an inquiry into the company amid the public scrutiny.
The Post’s report comes more than a month after Ackman publicly said he was betting against Herbalife, a company that he says operates as a pyramid scheme. Ackman’s firm Pershing Square Capital Management has bet more than $1 billion that Herbalife’s stock price will fall. He has called for the government to shut down the company.

Sunday, February 3, 2013

Is the world engaged in a Currency War?

  • Is the world engaged in a “currency war?”
  • January’s job report had some pleasant surprises, but more progress is needed
  • Purchasing managers surveys suggest growth in the US, retreat for Europe
Just over forty years ago, major economies agreed to allow exchange rates to float. This ended a long period of fixed currency values, which had been forged at the Bretton Woods conference just before the end of World War II. John Maynard Keynes was among the participants at Bretton Woods.

My fifth grade teacher had used the Bretton Woods fixings to sharpen our skill at multiplying numbers with decimals. I can still recall the conversion rate for the British currency: 2.4 dollars to the pound. Today, a pound costs $1.60. And the rate has fluctuated widely, hitting a low of $1.07 and a high of $2.60 since 1970.

Currency rates have an important influence on trade flows, as variations make one country’s goods more or less expensive to importers. The drive to export is something of an international competition, with trillions of dollars at stake. The stakes become even higher when nations are trying to work their way out of recession.

So it isn’t surprising that developments in the currency markets are getting very close attention at the moment. The euro and the yen have been at the center of that attention. 

Friday, February 1, 2013

EES: Is the drop in the pound sustainable

Today the Great British Pound (FXB) dropped against all other currencies, as much as 1.8% against the Euro.
The pound slumped the most in more than two years against the euro after an industry report showed U.K. manufacturing grew less in January than economists forecast, sapping demand for Britain's currency as a haven. 

Europe's banks still in trouble, Dutch government nationalizes SNS REALL

Nationalization of a Dutch bank Friday provided a stark reminder that Europe is still struggling to shake off the legacy of the financial crisis and find a way to let banks fail without loading up governments with debt.

The Dutch government was forced to rescue SNS REALL to protect savers' deposits after the banking and insurance group racked up huge losses on real estate lending. Attempts to find a private buyer or investor failed.

Italy is grappling with a scandal at the world's oldest bank that could affect the outcome of elections next month and dent Mario Draghi's record as Europe's top central banker.

Monte dei Paschi di Siena, founded in 1427, last week revealed it faced losses of up to €720 million on three derivatives trades, carried out in 2006-2009, details of which were kept hidden from regulators.

EES: FXCM Poised For Growth In Global Forex Market

FXCM is the largest retail Forex brokerage in the world. FXCM does have an institutional business, however what has made it not only the largest but also the most well known Forex brokerage in the world, was its retail business. However, it hasn't been an easy path for the company, as it has encountered many hurdles in a brand new industry.

FXCM Poised For Growth In Global Forex Market - Seeking Alpha

Moscow exchange IPO

Moscow Exchange’s initial public offering will value Russia’s main equity and fixed income bourse at $4 billion to $4.6 billion, according to two exchange shareholders.
The exchange set the IPO price range at between 55 and 63 rubles a share, according to two people, who asked not to be identified as the information hasn’t been made public. Bourse executives will meet investors for one day only on Feb. 4 at the exchange’s Moscow office, and follow with meetings in Europe and the U.S., Roman Filatov, a portfolio manager in Moscow at Sberbank Asset Management, who received an invitation, said by phone.