Market Share

So when you see Citi’s Q2 2012 earnings, remember that about ¼ of the number will come from non-interest bearing deposits covered by FDIC's TAG program.

Just as we noted here, the analyst estimates for the potential impact of Libor (litigation and regulatory) liabilities have begun. Morgan Stanley sees up to a 17% hit to 2012 EPS (from $420 to $847 million per bank) in a worst case from just regulatory costs, and a further 6.8% potential hit to 2013 EPS if the top-down $400 million average per banks losses from litigation are taken on one year (considerably more if the bottom-up numbers of more than $1 billion are included). They see LIBOR risk in three parts: regulatory fines (we est median 7-12% hit to ‘12 EPS; litigation risk (7% EPS hit over 2 yrs); and less certainty on forward earnings. There are a plethora of assumptions - as one would expect - but the ranges of potential regulatory fine and litigation risk are very large though the MS analysts make the greater point that the LIBOR 'fixing' broadens investor support for more transparency in fixed income trading in addition to fixed income clearing leaving the threat of thinner margins as another investor concern.

Fed Chairman Bernanke should be impeached if he does not restore Fed surveillance over primary dealers immediately.

Last week it was the Fairness Distributor In Chief threatening China with WTO action over its unfair duties on US car imports. Before that it was Europe trying to protect its crumbling trade at all costs with its primary trade partner. Now, it is China's turn to retort to the world's beggars, and all those who just happen to ravenously import its iWares with the reckless abandon of a gadget junkie. FT reports: "Beijing has threatened swift retaliation against a range of European Union industries if Brussels presses ahead with an investigation into government subsidies granted to two Chinese telecoms equipment companies. The Chinese threat was delivered at a meeting with EU trade officials in Beijing late last month that was arranged at the behest of Chen Deming, China’s commerce minister, to try to defuse a brewing trade dispute that is straining commercial relations between the two sides. Instead, it collapsed into acrimony, with the Chinese warning their EU visitors that they would respond to any investigation of Huawei and ZTE Corp by probing subsidies granted to European agriculture, automotive, renewable energy and telecoms companies. “Put it this way: it’s not like they went for a beer after and watched football,” one person briefed on the meeting said." None of this is new: recall China Lays Out Conditions Under Which It Will Bail Out Europe; Does Not Want To Be Seen As "Source Of Dumb Money" in which  Li Daokui "added that Beijing might also ask European leaders to refrain from criticising China’s currency policy, a frequent source of tension with trade partners." Looks like we can scrap those "China bails out Europe" (ignore the fact that the Chinese economy itself is imploding for a second) rumor in perpetuity.

Financial magazine Euromoney, which in addition to being a subscription-based publication appears to also rely on bank advertising, has just held its 2012 Awards for Excellence dinner event. And in the "you can't make this up" category we have Barclays winning the Best Global Debt House, Best Investment Bank, And Best Global Flow House Of The Year Awards. Specifically we learn that "the bank’s commitment to the US is exemplified by the addition of another global senior manager to the country – Tom Kalaris is now going to be splitting his time between New York and London as executive chairman of the Americas as well as overseeing wealth management. Jerry del Missier, who has overseen the corporate and investment bank through its Lehman integration and was recently appointed COO of the Barclays group, says the bank is well positioned. "We came out of the crisis in a stronger strategic position and that has allowed us to continue to win market share and build our franchise. Keep in mind that the US is the largest investment banking, wealth management, credit card and investment management market in the world, and in terms of fee share will remain the most dynamic economy in the world for many years. As a strong global, universal bank operating in a competitive environment that is undergoing significant retrenchment, we like our position." That said, with the Chairman, CEO and COO all now fired, just who was it who accepted the various award: the firm's LIBOR setting team? And if so, were they drinking Bollinger at the dinner?

With Europe, the BBA, and virtually everyone shocked, shocked, that the global bank cabal schemed and colluded for years to manipulate interest rates, so far only America appears relatively blase, and totally ignorant, about the issue. Perhaps it is because the first bank exposed in the manipulation scheme so far is European, perhaps because it is just tired of all the endless crime coming out of the criminal complex known as Wall Street. It is unclear. Then again, America will soon have its own manipulation scandals to deal with: and if it is not the US BBA member banks, all of whom were just as guilty as Barclays, and the only question is which bank will be the sacrificial scapegoat whose CEO will have to demonstratively depart (to warmer, non-extradition climes), it will be the following story from Bloomberg which will likely pick up much more steam over the next weeks and months, detailing how the bank which just barely avoided a triple notch downgrade (wink wink) has had previous dealings with the very same rating agencies seeking to, picture this, artificially inflate ratings! So to summarize: Fed manipulates capital markets, HFT manipulates bid ask spreads, "self-policing" CDS pricing market groups fudge the prices on trillions in Credit Default Swaps, bank cabals collude and manipulate short-term interest rates, and now banks are confirmed to have manipulated the ratings on tens of billions of bonds using monetary incentives and threats. Is there anything in this "market" that was fair over the past several decades, and was actual price discovery ever actually possible? Because by now it should be very clear going forward all the things that actually make a free and fair market are forever gone, and that without endless fraud and manipulation by all the market participants who realize that anyone defecting the ponzi group means immediate and terminal losses for all, and all those calls for an S&P 400 would actually prove to be overly optimistic.

GS just did what it does best: pulled the rug from under its most troubled peer: "We are downgrading MS to Neutral and removing shares from the America’s Conviction List. Since being added to the Americas Conviction List on January 29, 2012, MS shares are down 27% vs. flat for the S&P 500. Over the past 12 months, MS shares are down 39% vs. the S&P 500 up 4%. When we added shares to the Conviction List, we noted that MS had addressed a number of legacy issues including (1) the conversion of the MUFG preferred stock to common to bolster common equity capital ratios, (2) elimination of the CIC preferred dividend, (3) removal of the MBIA relationship//hedge overhang, (4) write-down of legacy real estate assets, (5) elimination of non-core asset management businesses, and (6) near-completion of the  integration of Smith Barney and Morgan Stanley Wealth Management. While that all still holds true today and should be beneficial towards long-term “normalized” returns, we believe several capital market overhangs will reduce out-year earnings visibility and cap near-term outperformance. While too soon to tell how counterparties will react to a new capital market ratings distribution post-Moody’s, this cycle has proven that banks with the largest increase in funding spreads have generally lost fixed income trading market share. In addition, with a number of global macro uncertainties likely to weigh on capital markets activity for the foreseeable future, MS has outsized exposure here as well....we are lowering our 12-month price target for MS to $16 (from $20) based on 0.6X TBV (from 0.7x) to reflect challenged near-term earnings power."

Capitalism at its best: kick 'em while they're down.

• Merkel Backs Debt Sharing in Germany Amid Closer EU Push (Bloomberg)
• With a ruling as early as today, here are four health care questions the Supreme Court is asking (CBS)
• George Soros - Germany’s Reticence to Agree Threatens European Stability (FT)
• China Stocks Drop to Five-Month Low (Bloomberg)
• The New Republic of Porn (Bloomberg)
• That's a costly detached retina: Greek Lenders Postpone Mission to Athens (FT)
• Spain Asks for Aid as EU Fights Debt Crisis (FT)
• Wolfgang Münchau - Why Mario Monti Needs to Speak Truth to Power (FT)
• U.S. Banks Aren’t Nearly Ready for Coming European Crisis (Bloomberg)
• MPC Member Wants £50bn Easing (FT)
• India Boosts Foreign Debt Ceiling by $5 Billion to Defend Rupee (Bloomberg)

Turkey remained the world's number one minter of gold coins in 2011. There is an increasing tendency for gold bars to be retail investors' vehicle of choice – although gold coins still retain a majority market share. Turkish people can pay in gold in certain foreign exchange houses and most jewellers will accept gold as payment. Turkish banks are is now offering digital gold saving accounts. Turkey expanded its gold reserves by 29.7 metric tons in April. Turkey’s bullion reserves climbed to 239.3 tons last month meaning that Turkey increased their gold reserves by 14% in April. The central bank on March 27 doubled the share of lira reserves banks can hold in gold to 20%, saying it would provide 6.1 billion liras ($3.3 billion) of extra liquidity. "This addition," the WGC says, "was the result of a policy change under which the central bank will now accept gold in reserve requirements from commercial banks to help the banks utilize their gold in managing their liquidity." Some analysts have suggested that the increase in Turkish gold reserves, as reported by the IMF, may actually be a form of “double accounting”. Whereby the gold held in Turkish banks client’s gold account is transferred from the local bank as a reserve to the central bank, from where it then figures as gold reserves.

All you need to know.

A land grab shrouded in a banking takeover, wrapped in a financial crisis "rescue." As always, insiders get first dibs.  (And, yes, there is an MF Global connection.)

While America may be experiencing the occasional zombie apocalypse breakout, probably due to the absence of easily available edible iPads, Greek retailers are preparing for the retail version. "British electrical retailer Dixons has spent the last few weeks stockpiling security shutters to protect its nearly 100 stores across Greece in case of riot. The planning, says Dixons chief Sebastian James, may look alarmist but it's good to be prepared." Why Dixons? "Europe's No 2 electrical retailer Dixons owns Greece's market leading but loss-making Kotsovolos chain, which has a 25-percent market share selling iPads and laptops as well as washing machines, televisions and air conditioning units." There we go: Bill Dudley's edible iPads. The question is what happens when this easily digestable piece of plastic is thoroughly looted after local rioters dispense with the "shutters" supposedly protecting their wares. What will be on the menu next? Sadly not booze: "Diageo, the world's biggest spirits group and the name behind Johnnie Walker whisky and Smirnoff vodka, has reacted by slashing its marketing spend in Greece, reducing stock levels and pulling cash quickly out of the country after it saw its Greek sales halve in the last three years to less than 100 million pounds." So: no food, no booze, no cheap 99 cent iPad aps: this is the way the world's most miserable monetary experiment ends.

Just after the market close on what will probably go down as the worst day in history for every stock-broker-come-private-wealth-commission-taker's wealth-manager's future business (that would be the Facebook IPO - or as some call it "Blue-Friday"), the head of Morgan Stanley's 'Consulting Services Group' sent what is likely the worst timed, worded, and ironic self-congratulatory email of all time. James Walker, the MD of the group (correction - Andy Saperstein - who later blamed the NASDAQ for all his woes)- which manages $385 billion of client assets and is the nation's largest managed accounts business - was not wrong in his summation that this IPO was "orderly, fair, and well-communicated" and "will have a long-lasting impact on our clients and the organization". We assume he didn't mean "finish it" as one can only imagine the breadth of these clients who ended up stuffed full of the worst large IPO of the decade.

Only in public schools and universities is the fairy tale still taught that governments are representative of the people.  The blue collared man on the street realizes the chips are stacked against him.  For those who don’t have political connections, the pseudo fascist system that is still referred to as “capitalism” in the U.S. is akin to a casino game of chance.  That is, the odds are always in the house’s favor.  The house is the federal leviathan and its equivalent at the state and local level as well as the big, cartelized industries which feed off government protection. With Obamacare, the middle class will end up being liable for yet another entitlement program that, like any other government initiative, will cost more than was initially estimated.  Worse yet, they will be bombarded with advertisements they paid for which attempt to convince them that Uncle Sam has once again delivered prosperity with a badge and a gun. The disheartening part is some Americans will be foolish enough to actually believe it.

For anyone who can't see the "WHY" or "HOW" in a Muppet Manipulators suit, re: Facebook IPO, here's a step by step guide comparing my research to that of the top 4 underwriters showing exactly what they did wrong & how everyone is ignoring it