Nearly a year ago, we predicted that the party for bond traders was over. The reason: MBS bond trader Jesse Litvak, formerly of mid-tier, perpetual aspirational bulge bracket, and the place where every fired UBS banker has a safety cubicle, Jefferies, got not only too greedy (that's ok, everyone on Wall Street is), but what's worse, got caught, and as we said at the time, ended the party for Wall Street's bond trading cash bonanza. Little did we know how correct we would be, because not only did the former MBS trader, who "proceeded to rip virtually all of his clients on seemingly every single trade he executed for the three years he was employed at Jefferies, lying to everyone in the process: both clients and in house colleagues, generating some $2.7 million in additional revenue for Jefferies for the duration of his tenure, and who knows how much in personal bonuses", end the party, but it appears he unleashed the next big regulatory crack down on Wall Street. And one which may just cost perennial Department of Justice favorite JPMorgan another several billion in "litigation reserves."
As usual, in 2013, sticking to facts was a mistake in a world fueled by misinformation, propaganda, delusion and wishful thinking. Those in power have successfully held off the unavoidable collapse which will be brought about by their ravenous unbridled greed, and blatant disregard for the rule of law, the U.S. Constitution and rights and liberties of the American people.
"There is no disputing the facts. The economic situation is deteriorating for the average American, the mood of the country is darkening, and the world is awash in debt and turmoil. Every country is attempting to print their way to renewed prosperity. No one wins a race to the bottom. The oligarchs have chosen a path of currency debasement, propping up insolvent banks, propaganda and impoverishing the masses as their preferred course. They attempt to keep the masses distracted with political theater, gun control vitriol, reality TV and iGadgets. What can be said about a society where 10% of the population follows Justin Bieber and Lady Gaga on Twitter and where 50% think the National Debt is a monument in Washington D.C. The country is controlled by evil sycophants, intellectually dishonest toadies and blood sucking leeches. Their lies and deception have held sway for the last four years, but they have only delayed the final collapse of a boom brought about by credit expansion. They will not reverse course and believe their intellectual superiority will allow them to retain their control after the collapse.”
So simple the underwear gnomes could do it:
- Create a cartel
- Corner and manipulate the market
And that's why they (and Jamie Dimon) are richer than you.
There are those who would blame the people who have chosen to live far beyond their means. They have a point. The financialization of America; where Wall Street con artists,shysters and swindlers rake in billions for shuffling paper and making risky casino bets; mega-corporations ship blue collar middle class jobs to Asia in an all out effort to increase quarterly profits; politicians spend future generations into the poor house in order to get re-elected; and the Federal Reserve purposefully creates monetary inflation to prop up the corrupt system; has systematically destroyed the working middle class and created generations of debt slaves. The American people have been foolish, infantile, and easily duped. But it is clear to me who the real culprits in our long downward spiral have been. Lord Acton stated the obvious, many years ago:
“The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks.”
? John Emerich Edward Dalberg-Acton
There is a saying: "don't buy the hand that feeds you" but there is nothing in popular aphorism literature about suing the hand that bails you out. Which is precisely what JPM did overnight when it sued the Federal Deposit Insurance Company, claiming the agency was responsible for over $1 billion in liabilities assumed by the bank as part of its takeover of Washington Mutual in 2008. Of course, having been the subject of a relentless battery of lawsuits by every US agency imaginable, many were wondering when JPM would strike back, or rather if it would have the temerity to sue the same government that bailed it out with billions of direct injections and even more billions in FDIC-subsidized bond issuance. The answer is yes, and as JPMorgan alleged in the complaint, the FDIC agreed to shield it from liability from lawsuits claiming failures by Washington Mutual. JPMorgan said it took on only limited liabilities in its purchase of the Seattle-based bank’s assets. What next: Jamie Dimon sues the Fed for forcing it to acquire Bear Stearns' assets at the firesale price of $2 $10 per share, in which the bank assumed Bear's assets if not so much its liabilities - after all there was a government to bail it out for that.
- J.P. Morgan to Pay Over $1 Billion to Settle U.S. Criminal Probe Related to Madoff (WSJ)
- Ford board aims to pin down CEO Mulally's plans (Reuters)
- Raising Minimum Wage Is a Bad Way to Help People (BBG)
- Japan Lawmakers Demand Speedy Pension Reform (WSJ)
- EU reaches landmark deal on failed banks (FT)
- In which Hilsenrath repeats what we said in August: Fed Moves Toward New Tool for Setting Rates (WSJ)
- Senators Vow to Add to Iran Economic Sanctions in 2014 (BBG)
- Centerbridge in $3.3bn LightSquared bid (FT)
- Banks, Agencies Draw Battle Lines Over 'Volcker Rule' (WSJ)
We’ve spent the last five decades learning to love our oppression, adoring our technology, glorying in our distaste for reading books, and wilfully embracing our ignorance. Huxley’s vision of a population, passively sleep walking through lives of self- absorption, triviality, drug induced gratification, materialism and irrelevance has come to pass. Only in the last two decades has Orwell’s darker vision of oppression, fear, surveillance, hate and intimidation begun to be implemented by the ruling class. We’ve become a people controlled by pleasure and pain, utilized in varying degrees by those in power. Stay tuned for our modern day Hunger Games after this commercial for your very own Duck Dynasty Chia Pet.
And so it is done (as we detailed here)... and due to be put in place as of April1st 2014 (rather ironically). The 100-plus-pages of rules and regulations prohibit two activities of banking entities: (i) engaging in proprietary trading; and (ii) owning, sponsoring, or having certain relationships with a hedge fund or private equity fund. But the kicker...
"requires banking entities to establish an internal compliance program designed to help ensure and monitor compliance with the prohibitions and restrictions of the statute and the final rule."
Great! Because self-regulation worked so well in the past for the financial services industry.
In the aftermath of the devastating, vicious, tax-deductible DOJ settlement with JPMorgan, its stock may have responded by soaring to new all time highs (unclear if it was JPM's prop desk - in violation of the Volcker and every other rule - doing most of the buying) but that doesn't mean the benefits go out equally to all. According to Reuters, while JPM's shareholders will reap the benefits of yet another year in which Jamie Dimon uses nearly $600 billion in excess reserves, aka excess deposits, to ramp product risk around the globe and corner assorted markets (until various unknown teapot tempests blow up in his face), JPM's employees - unable to manipulate every market as much as they want to, and as much as they have in the past now that every action by JPM is scrutizined - will be stuck with total all in compensation that is unchanged from last year. Oh the humanity.
With Ackman, Druckenmiller, Robertson, PTJ And Dimon On Deck, Here Are The Best "Robin Hood" Day 1 Hedge Fund IdeasSubmitted by Tyler Durden on 11/22/2013 08:57 -0400
Someone must have had an odd sense of humor to name a conference in which the most prominent US hedge funds appear, after Robin Hood - it seems in the New Normal the prince of thieves takes from the Middle Class and gives... to himself. Snyde remarks aside, yesterday was Day 1 of the Robin Hood investor conference, with such speakers as David Einhorn and Dan Loeb putting on their best book-talking face and pitching their currently marketable ideas (which they have put on long ago and are likely selling into strength). Below is a summary of the top recommendations from Bloomberg.
A new opportunity to play "What's wrong with this picture" arose recently, with Larry Summers’ recent speech at the IMF and Paul Krugman’s follow-up blog. The two economists’ messages are slightly different, but combining them into one fictional character we shall call SK, their comments can be summed up "...essentially, we need to manufacture bubbles to achieve full employment equilibrium." With this new line of reasoning, SK have completely outdone themselves, but not in a good way. Think Jamie Dimon’s infamous “that’s why I’m richer than you” quip. Or, Bill Dudley’s memorable “but the price of iPads is falling” excuse for increases in basic living costs. Dimon and Dudley managed to encapsulate in single sentences much of what’s wrong with their institutions. Yet, they showed baffling ignorance of faults that are clear to the rest of us.
If one was a foreigner visiting for the first time, one would think Space Available was the hot new retailer in the country. Thousands of Space Available signs dot the bleak landscape, as office buildings, strip malls, and industrial complexes wither and die. At least the Chinese "Space Available" sign manufacturers are doing well. The only buildings doing brisk business are the food banks and homeless shelters. However, reports like the recent one from SNL Financial – Branch Networks Continue to Shrink - are emblematic of the mal-investment spurred by the Federal Reserve easy money policies, zero interest rates, and QEternity... In a truly free, non-manipulated market the weak would be culled, new dynamic competitors would fill the void, and consumers would benefit. However, extending debt payment schedules of the largest zombie entities and pretending you will get paid has been the mantra of the insolvent zombie Wall Street banks since 2009.
- FHFA Is Said to Seek at Least $6 Billion From BofA for MBS Sales (BBG)
- Record Pact Is on the Table, But J.P. Morgan Faces Fight (WSJ)
- Magnetar Goes Long Ohio Town While Shorting Its Tax Base (BBG)
- Mini-Wall Street' Rises in Hamptons (WSJ)
- Obama to call healthcare website glitches 'unacceptable' as fix sought (Reuters)
- Starbucks Charges Higher Prices in China, State Media Says (WSJ)
- Cruz Is Unapologetic as Republicans Criticize Shutdown (BBG)
- Berlusconi struggles to keep party united after revolt (Reuters)
- SAC Defections Accelerate as Cohen Approaches Settlement (BBG)
While last week's relentless panic buying has been extensively commented on, it was last week's nearly 50% plunge in near-term stock vol that the major news as the world went from risk off mode to risk on. It wasn't just stocks whose volatility imploded: it was the implied near-term volatility of all asset classes that was hammered in the past three days. But while everyone is fascinated by the rapid VIX down move, it is what someone did on Friday by betting that VIX will double by February in a 24/29 VIX Call Spread, that was of note. The amount wagered: $6.7 million. Whether or not this was an outright trade, or a hedge (and if one listens to Jamie Dimon perjuring himself to Congress, any trade is a hedge, adding further to the confusion) is unknown, but it is not pocket change betting that the plunge in vol will be merely transitory.
Under the guidance of Jamie Dimon, adjudged by the mainstream media to be the greatest banker the world has ever known (hyperbole accepted), a late night Friday phone call (we assume not a drunk-dial) between Attorney General Eric Holder and JPMorgan's general counsel, confirms, according to the WSJ, that JPMorgan will settle their residential mortgage bond suits with the DoJ for $13 Billion - the biggest settelement ever for a single company. Bloomberg reports that an additional $2 billion was added during the negotiations last night. Who knows: perhaps Dimon feels the same about Holder as the rest of the population and made it quite clear, at a cost of another $2 billion. The final wording of the deal is to be finalized but as part of the deal the DoJ expects JPM to cooperate with the continuing criminal probe of the bank's RMBS issuance - which remain unresolved. The settlement is 'unsurprisingly' in line with JPM's expected litigation expenses for Q2/Q3 13 but it would appear they expect worse to come still as the total litigation reserve was recently increased.