Opinion

Ben Walsh

from Felix Salmon:

Counterparties: A minimal vision at Barclays

Ben Walsh
Feb 12, 2013 23:26 UTC

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At the recently revamped house of Barclays, the inspiration for the full-year earnings announcement was minimalism: 3,700 fewer employees, $2.6 billion in cut costs, and promises to reduce the size of what the Guardian called its “industrial scale” tax avoidance business. There was, however, an inevitable hangover from the the prior regime: a $1.6 billion loss in fiscal-year 2012. That came thanks to the $1.6 billion set aside to compensate clients for mis-selling derivatives and loan insurance.

Extolling the virtues of virtue appears to be key to the new identity. New CEO Anthony Jenkins described the results of a strategic review, which was sparked by Barclays role in the Libor-fixing scandal. Business units, Jenkins said, will be evaluated, in part, on “their strategic attractiveness, including their impact on Barclays reputation”.

In an echo of Deutsche Bank’s Strategy 2015+, Jenkins said that it would take until 2015 to fully implement this new vision, which includes the layoffs and cost cutting measures mentioned above, reducing risk-weighted assets, and also managing to somehow increase both dividends and Tier 1 capital at the same time. Moreover, all this will be done while maintaining current return on equity of 11.5%.

As Barclays adopts a new, more austere formality, it remains unclear if customers who previously came to the bank for its unique brand of actuarial insouciance will remain loyal to the brand. The FT points out that “at its peak, Barclays’ controversial tax structuring unit... contributed the bulk of the group’s investment banking revenue”. Management says it intends to fill the gaping hole in its revenues by expanding its global customer base and growing the wealth management business. That’s not going to be easy, but thus far, investors’ first impression have been positive: Barclays shares are at their highest level in almost two years. -- Ben Walsh

from Felix Salmon:

Counterparties: The devil’s in the emails

Ben Walsh
Feb 6, 2013 22:49 UTC

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com.

There’s a certain inevitability to RBS’s $612 million Libor-rigging settlement and the Justice Department’s civil charges against S&P for faulty ratings. Like at Barclays, Goldman Sachs, Standard Chartered, and UBS, RBS and S&P’s scandals come complete with how-could-they-put-that-in-writing electronic communications.

RBS’s contributions to this now-venerable tradition come courtesy of the CFTC and FSA, and are wrapped up nicely by Dealbook and FT Alphaville. One trader asked that the rate set be at a certain level by writing to the submitter that “if u did that i would come over there and make love to you”. Another said  “its just amazing how libor fixing can make you that much money”. Believing that the US dollar Libor was being watched by the Fed, a Yen trader said “dun think anyone cares the JPY Libor”. Scattered throughout is the requisite amount of trading floor profanity, along with a decent number of emoticons.

from Felix Salmon:

Counterparties: Not all that bursts is a bubble

Ben Walsh
Feb 5, 2013 22:53 UTC

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com.

If you aren’t terrified about the coming bond bubble, you should be, according to those who have taken it upon themselves to play interest-rate Paul Revere. Finance heavyweights like Lloyd Blankfein, Gary Cohn, Bill Gross, and Jeff Gundlach have each voiced their concern. Fitch has chimed in too.

There’s nothing particularly new about these warnings. Businessweek’s Roben Farzad charts the “many cautionary, even alarmist, headlines” that have appeared over the last six months. Quartz’s Matt Phillips says that we are now in the fifth year of headlines warning of a spike in rates.

from Felix Salmon:

Counterparties: The non-industrious military complex

Ben Walsh
Jan 30, 2013 22:09 UTC

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com.

America’s economy defied expectations and shrank 0.1% in the fourth quarter -- analysts expected 1.1% growth. And it’s all the military’s fault. Or at least, the fault of declining defense spending.

Brad Plumer runs through just how significant the fall off was:

Government defense expenditures plunged by a staggering 22.2% between October and December... The Pentagon spent significantly less on just about everything except military pay. Had the Pentagon not cut back on spending, the economy would have grown at a weak but positive 1.27% pace.

from Felix Salmon:

Counterparties: Not so golden, still delicious

Ben Walsh
Jan 28, 2013 19:30 UTC

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com.

Apple’s stock is down 23% in the last six months. Last week’s earnings report caused an overnight drop in shares from $514 to $461. Earnings growth is decreasing. Investor Jeff Gundlach thinks it’s a “broken company” where innovation has been reduced to “just changing the size of... products”. Fast Company explains “Why Apple is losing its aura” while the WSJ asks “Has Apple Lost its cool to Samsung?”

Not so fast. Legendary VC Michael Moritz, who first bought Apple equity in 1978, has stepped into the doomsaying to decry the lack of “any sense of perspective”. Quarterly revenues, he notes, grew 18%, and topped $50 billion for the first time. And while Apple does face stiff competition, it’s only because it is so successful:

from The Great Debate:

Lance Armstrong is world-class – at capturing regulators

Ben Walsh
Jan 24, 2013 15:11 UTC

Lance Armstrong’s world-class abilities – as an athlete, manipulator, liar, and bi-pedal pharmacological wonder – are well-documented. What shouldn’t be overlooked, though, is that Armstrong also excelled at capturing his regulators, the same way banks and other industries capture theirs. His undetected doping fueled success, and Armstrong deployed that success better than anyone in the sport as a tool to continue doping.

At his peak, Armstrong was the biggest star in cycling, and a bigger star than any cyclist before him. He needed cycling, but cycling officials and race organizers, not to mention sponsors and manufacturers, needed him too. Here’s his former teammate Frankie Andreu:

He owned the cycling industry. Whatever he said, happened. He had a ton of money and money can buy a lot of things that other people can't get. He knew who did what, because he was the ringleader.

from Felix Salmon:

Counterparties: The American growth divide

Ben Walsh
Jan 22, 2013 19:16 UTC

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The world’s plutocrats are currently heading to a more “dynamically resilient” -- and possibly more complacent -- Davos. Don’t expect much introspection, and definitely don’t expect much debate on the hard-to-define “value of finance”.

At the DLD Conference in Munich today, Peter Thiel had an interesting take on the rise of financial services. America’s past 80 years, he said, can be divided into two periods: From 1933 to 1973, real incomes rose 350%; from 1973 to 2013, they rose just 20%. While Americans have remained optimistic about economic growth, Thiel thinks they’ve become uncertain about its sources. That uncertainty, Thiel says, drives Americans to try to benefit from the economic value of others rather than creating it themselves. Because of this, investing in markets generally takes priority over funding specific businesses.

from Felix Salmon:

Counterparties: Like water for profit

Ben Walsh
Jan 16, 2013 23:10 UTC

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In the unlikely event that you were harboring deep anxiety about the profitability of Goldman Sachs or JP Morgan, you can skip the Xanax. At the big banks, profits are very much back.

The new Goldman Sachs, Stephen Gandel writes, looks “a little bit like the old Goldman Sachs”. Goldman today reported that its fourth quarter profit rose 53% and full year earnings jumped 70%. The bank also pulled $6 billion in revenue from its own investments for the year, or 17% of its overall revenue. Goldman even found time to placate the rival -- and overlapping -- factions of employees and shareholders by cutting the amount of revenue going to employees, reports Lauren LaCapra. At 38%, Goldman’s compensation ratio is second lowest since the bank went public. Still, in absolute dollars, bank employees got a bump: comp rose 6% over last year.

from Felix Salmon:

Counterparties: RoboCapitalists

Ben Walsh
Jan 14, 2013 22:57 UTC

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com.

The robots are coming for your job.

In the past few months there’s been a boomlet of very smart people worrying about the economic consequences of our increasingly robotic future. Kevin Kelly, in a cover story for Wired last month, describes this imminent -- but not yet sentient -- threat: “before the end of this century, 70 percent of today’s occupations will likewise be replaced by automation... robot replacement is just a matter of time”. He’s not worried, however, because “The one thing humans can do that robots can’t (at least for a long while) is to decide what it is that humans want to do”. You will always have a job; it will just consist primarily of telling robots what to do.

Robot servants and factory workers may give us more leisure time, but Noah Smith worries they’ll further erode labor’s declining share of national income. Even more problematic, they will cause “old mechanisms for coping with inequality break [to] down”. Paul Krugman agrees that a shift is necessary: if labor’s share if income continues to decline, “it makes nonsense of just about all the conventional wisdom on reducing inequality. Better education won’t do much to reduce inequality if the big rewards simply go to those with the most assets”.

from Felix Salmon:

The Tim Geithner Legacy Project

Ben Walsh
Jan 10, 2013 22:57 UTC

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com.

Step One in the Tim Geithner Legacy Project is complete: Barack Obama delivered a ringing endorsement of the Treasury secretary, who’ll be stepping down on January 25. Here’s the president:

“With the wreckage of our economy still smoldering and unstable, I asked Tim to help put it back together. So when the history books are written, Tim Geithner is going to go down as one of our finest Secretaries of the Treasury.”

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