Commentaries
Now raising intellectual capital
from Rolfe Winkler:
Lunchtime Links 1-15
Consumer protection agency in doubt (Paletta, WSJ) Chris Dodd appears willing to trade the CFPA in exchange for Republican support of his financial reform bill.
Manhattan apt rents drop 9.4% in Q4 (Gittelsohn, Bloomberg) Great stimulus for the NY economy.
Volcker calls for support in fighting bank lobby on reforms (Harper, Bloomberg) Looking to get a copy of this speech to post later today.
Can online comments affect your credit? Yup. (Sandberg, SF Chronicle) More an oddity than a trend, but interesting nonetheless.
CBO: Fannie/Freddie cost government $291 billion in '09 (Golobay, HW) The full report from CBO is here. CBO estimates the total cost of subsidizing Fan/Fred will only be $99 billion more through the end of 2019. Meanwhile most of the housing stock in the U.S. will end up on the government's balance sheet.
JP Morgan loan losses overshadow higher profit (Comlay, Reuters) The bank reported earnings that beat analyst estimates, but the reasons for the beat -- lower taxes and lower bonus accruals in JPM's investment bank -- are considered "low quality" because they aren't sustainable sources of profit. And lower bonus accruals may sound good from a populist point of view, but they don't really help anyone other than bank shareholders who get to retain the earnings.
Monologue wars (Gawker) Late night hasn't been this interesting in years. The 10@10 segment with Jimmy Kimmel on Leno is gold. In related news, Conan's show is for sale on Craigslist.
from Rolfe Winkler:
Lunchtime Links 12-11
Jamie gets a deal! (Bloomberg) Prof. Linus Wilson had been estimated that warrants the government got as part of its TARP bailout for JP Morgan were worth $11-$37. They ended up selling for $10.75. The lower price is most likely because these are not common securities, are illiquid, and therefore worth less than we all thought. Can't really complain. The market spoke. Dimon looks smart for refusing to negotiate bilaterally with Treasury to repurchase them. Treasury was driving too hard a bargain. IIn retrospect, that means the deals on TARP warrants for the likes of AmEx and Goldman ended up going off much better for taxpayers. But Hank Paulson still did far worse negotiating with banks for emergency capital than Warren Buffett. Shame.
Ginnie Mae's growth puts taxpayers on the hook (Grow/Goldfarb, WaPo...via Patrick) Ginnie packages FHA mortgages into mortgage-backed securities. It's the next Fannie/Freddie....
Stratfor: It's not just Greece, other Eurozone countries (Delivingne, Money Game)
Wealth rebound in Q3, is it sustainable? (EconomPIC data) More fun from the Fed's flow of funds report.
Why women are hottest in coutries with too few dudes (Hooking up smart) Supply and demand at work.
Craigslist and eBay in legal fight (Hals, Reuters)
ok… argument #1 for not having comments on the front page.
JP Morgan sure to point out it’s giving back to the community
JP Morgan’s PR machine was sure to give a shout out to loan modifications as a counter to the embarrassing amount of riches reported in their third quarter report. The press release of course leads with its eye popping net income of $3.6 billion in the quarter. But before the bank details all the glorious gains in investment banking fees and fixed income, Jamie Dimon takes a moment to say how much the bank is doing for the community.
We recently announced the decision to revamp our overdraft policies to make it easier for customers to have more control over the fees they pay. In addition, our Card Services business has developed new innovative products that enhance the way customers manage their spending and borrowing. We are also aiding communities by working with struggling mortgage customers to modify their loans. We have approved more than 262,000 new trial modifications under the U.S. Making Home Affordable Program and our own modification program, nearly 90% of which include a reduction in payments for the homeowner. Since 2007, we have helped families by initiating 782,000 actions to prevent foreclosure, and we are committed to doing our part to support economic recovery going forward.”
First, the overdraft fees were shameful to begin with, and its doubtful loan modifications would have gotten off the ground without the government pushing it.
The banks are going to work a lot harder than that if they want to manage their pr. Record bonuses this year aren’t going to go over very well with taxpayers who have recently lost their jobs or fear losing them even though their money helped shore up the financial system to begin with.
We have paid to keep them alive. And we now pay to keep them in profit. If the banks really want to “give back” to the community then hows about not charging interest on monies lent?
That would put money back on the coffers of the banks and the business community can pay interest on loans taken out. That would be fair.
Lending money at interest is called usury. It has been said for thousands of years that this is wrong. This housing mess wouldn’t be a mess except for the fact that interest and profit motivated those people of lesser character to use what influence they could to take profit at the expense of those around them.
Because there were so many people of low character doing this at the same time, our financial industry was brought down. This mess has brought all of us great suffering.
Profit and interest have outgrown their usefulness as motivators. We must now grow up and work to solve real problems. We must grow up and realize that the only thing really worth working for is a better quality of life. Money does nothing to provide this in and of itself. It should therefore not be valued as if it can.
Let’s grow up and become results based and not profit based in our approach to life’s difficulties.
We are not animals and we should not be content to live as such.
Cazenove’s yield may muddy JP Morgan deal
As your friendly neighbourhood investment bank rarely tells you, something like 80 percent of deals don’t pay off. So why do one if you don’t have to?
That is the question facing the mighty City of London firm of Cazenove. Five years after Caz poured its investment banking business into a joint venture with the U.S. bank, JP Morgan <JPM.N>, it has to decide whether to go the whole hog and sell the remainder — or to hang on.
Technically the shares are the subject of a put and call arrangement — JP Morgan can force Caz’s investors to sell and vice versa. But it is hard to imagine the Americans obliging the shareholders to sell if they clearly don’t want to.
Which raises the question: why would they want to?
A deal has certain attractions for JP Morgan. The bank’s UK business would be simpler if it owned 100 percent of its UK investment banking operations. The current set-up is quite advantageous for Caz. Not least it gives it access to JP Morgan’s deep pockets and client list.
But these are also good reasons for Caz shareholders to hang on. Most commentators have focused on the cultural reasons for leaving the joint venture intact and these are indeed potent. But there are also good financial reasons to leave things where they are. Take the fact that the joint venture perches on JP Morgan’s mega balance sheet. This gives it the best of both worlds. It can use the U.S. bank’s financial heft to haul in equity capital markets business but it doesn’t carry the risk. Any duff underwritings land on JP Morgan’s plate.
This means the JV hardly needs any capital. Caz itself is a shell these days — its only asset is its near 50 percent stake in the joint venture. That in turn means almost all its profits are flushed through as dividends. Caz’s share of the joint venture’s after-tax profit last year was 46 million pounds, all of which was paid to its own shareholders (plus a further 3 million generated by Caz itself).
Can anyone plese tell me does Cazenove shares traded in any stock exchange? something written in the annual report about internal market?
will really appreciate if anyone can provide ISIN code
Thanks in advance
Ash
Morgan Stanley keeps Goldman from top M&A slot
Despite top billing for M&A involving European companies as well as Asia-Pacific and Japanese corporates, Goldman is not top of the league tables for global M&A for the year to date.
Instead it is long-time rival Morgan Stanley leading the pack, capitalising on a sizeable advantage in deals involving U.S. companies. Goldman is in second place in the worldwide ranking and JP Morgan third.
While the usual suspects are top of the tables, the big banks aren’t having it all their own way. Evercore Partners stands in 5th position for advising on deals with a U.S. flavour, behind Morgan Stanley, Goldman, JP Morgan and Citi.
But with five months still to go and M&A mandates scarcer than before, there is bound to be plenty of scrapping for top slot before 2009 is done.
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The Wall
