Bank of America
"The global financial landscape was evolving. Ever since World War II, US bankers hadn’t worried too much about their supremacy being challenged by other international banks, which were still playing catch-up in terms of deposits, loans, and global customers. But by now the international banks had moved beyond postwar reconstructive pain and gained significant ground by trading with Cold War enemies of the United States. They were, in short, cutting into the global market that the US bankers had dominated by extending themselves into areas in which the US bankers were absent for US policy reasons. There was no such thing as “enough” of a market share in this game. As a result, US bankers had to take a longer, harder look at the “shackles” hampering their growth. To remain globally competitive, among other things, bankers sought to shatter post-Depression legislative barriers like Glass-Steagall. They wielded fear coated in shades of nationalism as a weapon: if US bankers became less competitive, then by extension the United States would become less powerful. The competition argument would remain dominant on Wall Street and in Washington for nearly three decades, until the separation of speculative and commercial banking that had been invoked by the Glass-Steagall Act would be no more."
- HSBC 181K
- JP Morgan 200K
- Goldman Sachs 200K
- Barclays 225K
- Bank of America 230K
- Citigroup 240K
- UBS 250K
- Deutsche Bank 275K
While we have covered the various ways in which Americans are scraping by in the current feudal economy, from food stamps and disability fraud, to student loans and living in mom and pop’s basement, this reverse mortgage thing is a piece of the puzzle we have been missing. These mortgages are not insignificant either. According to Inside Mortgage Finance, originations were up 20% in 2013, hitting $15.3 billion. So when you see that older guy working the cashier at Wal-Mart and wonder to yourself how he is surviving, the answer may increasingly be a reverse mortgage. Oh, and since the FHA is originating many of these loans, you the taxpayer will be on the hook!
While everyone was gushing over the spectacle on TV of a pro-HFT guy and anti-HFT guy go at it, yesterday afternoon we reported what was by far the most important news of the day, one which was lost on virtually everyone if only until this morning, when we reported that "Monetary Blockade Of Russia Begins: JPMorgan Blocks Russian Money Transfer "Under Pretext" Of Sanctions." This morning the story has finally blown up to front page status, which it deserves, where it currently graces the FT with "Russian threat to retaliate over JPMorgan block." And unlike previous responses to Russian sanctions by the West, which were largely taken as a joke by the Russian establishment, this time Russia is furious: according to Bloomberg, the Russian foreign ministry described the JPM decision as "illegal and absurd." And as Ukraine found out last month, you don't want Russia angry.
In the middle of 2012, to much yield chasing fanfare, China launched a private-placement market for high-yield bonds focusing on China's small and medium companies, that in a liquidity glutted world promptly found a bevy of willing buyers, mostly using other people's money. Less than two years later, the first of many pipers has come demanding payment, when overnight Xuzhou Zhongsen Tonghao New Board Co., a privately held Chinese building materials company, failed to pay interest on high-yield bonds, according to the 21st Century Business Herald.
The Federal Reserve is likely to suffer significant losses on its Treasury holdings once interest rates rise from historic lows. Indeed, the researchers at the San Francisco Fed have recently called for "stress tests" on the Fed itself. Fail to prepare ... prepare to ...
Could the U.S. unleash a flood of oil from the strategic petroleum reserve that would drive down prices in order to punish Russia? While the idea has been kicked around over the last few weeks – most recently by George Soros – it has also been dismissed as not a serious option. Some say the impact of an oil sale, if it actually succeeded in lower prices, would be temporary. Saudi Arabia could cut back on production to keep oil prices at their current levels. Others decried the idea as contrary to the objective of the SPR, which has been setup to be used only in cases of emergency. However, any collusion would be a problem since the Saudi King is convinced the U.S. is “unreliable,” and relations between the two countries hit a low point after Obama’s back and forth over air strikes on Syria last year.
Howard Marks once wrote that being a "contrarian" is a lonely profession. However, as investors, it is the downside that is far more damaging to our financial health than potentially missing out on a short term opportunity. Opportunities come and go, but replacing lost capital is a difficult and time consuming proposition. So, the question that we will "ponder" this weekend is whether the current consolidation is another in a long series of "buy the dip" opportunities, or does "something wicked this way come?" Here are some "words of caution" worth considering in trying to answer that question.
Bank of America No Longer Even Bothers To Blame The "Weather" Or "Storms" For Weak Consumer SpendingSubmitted by Tyler Durden on 03/28/2014 09:35 -0400
Two weeks ago, when Bank of America found that its weekly retail spending data has continued coming in far weaker than expected compared to 2013, it did the laughable: it blamed not the weather in general, but one storm in particular, to wit: "once again adverse weather potentially impacted spending last week, as the storm “Titan” moved across the US over the weekend of March 1st and 2nd and was followed by yet another cold spell." Two weeks later, after shockingly BofA finds precisely the same weakness continuing into the end of a balmy March, it no longer even bothers looking for excuses. The sad reality: there are none.
As the cost of living increases around the globe, wage protests and strikes have become commonplace, particularly in the emerging market space:
- BOE to Sign Agreement With China on Yuan Clearing Next Week (BBG)
- U.S. law firm plans to bring suit against Boeing, Malaysia Airlines (Reuters)
- Citigroup Fraud Stings Mexico Star as Medina-Mora Chased (BBG)
- Fraternity Chief Feared for Son as Hazings Spurred JPMorgan Snub (BBG)
- UBS suspends six more forex traders (FT)
- Goodbye CSCO Q1 EPS: China to strengthen Internet security after U.S. spying report (Reuters)
- Good luck: Spain Banks With $55 Billion of Property Seek Deals (BBG)
- Citic Pacific Said to Plan About $4 Billion Public Offering (BBG)
- Yahoo Japan to buy eAccess from SoftBank for $3.2 billion (Reuters)
- "Whatever it takes" to talk down the Euro: Euro, peripheral bond yields fall on ECB easing debate (Reuters)
Why is Citigroup not like any of the top four banks, including JPM, WFC, USB or BAC?
“Too Big To Fail” … Fails
The credit cycle is called a "cycle" because, unlike the business cycle (which the Fed has convinced investors no longer exists), it 'cycles'. At some point the re-leveraging of the balance sheet - remember more cash on the balance sheet but even morerer debt (as we noted here) - requires risk premia that outweigh even the biggest avalanche of yield-chasing free money. It appears, as Bloomberg's James Crombie notes, that point may be approaching as yield premiums for U.S. distressed debt hit a five-year high on March 25, according to Bank of America Merrill Lynch.
Another year, another failure by Citigroup to i) pass the Fed's stress test and ii) be able to stop investing cash in such idiotic fundamental concepts as CapEx, and instead reward activist shareholders with increased dividends and buybacks. As the WSJ reports, Citigroup "failed to get Federal Reserve approval to reward investors with dividends and stock buybacks, a significant blow to Chief Executive Michael Corbat's effort to bolster the bank's reputation following a 2008 government rescue." Hardly surprising for a bank which effectively was wiped out in the crisis and which only survived thanks to the Fed-backed crammed-up, spinoff of billions of toxic assets into a bank bank, however certainly surprising for a bank that is supposed to be "fixed" five years into a "recovery." What's worse, the stock is now trading below the infamous $5 level on a pre-split adjustment level - the same split that was supposed to at least optically, give the impression that things at Citi are ok. Turns out optics is only half the answer.