Corporate Finance

Futures Flat Despite China Scare As Oil Rebounds Over $47

The main risk over the weekend was that markets, which have now dropped for three consecutive weeks the longest negative streak since January, would focus their attention on the latest batch of negative Chinese economic news released over the weekend, which missed expectations across the board, most prominently in Retail Sales and Industrial Production, and following Friday's disappointing new credit loan data, would sell off as the Chinese slowdown once again becomes a dominant concern. However, after some initial weakness, the risks were all but gone when first the USDJPY jumped on another round of deflationary Japanese economic data which led to renewed hopes of more BOJ easing and a jump in the USDJPY and thus US futures.

China Sees First Offshore Default By State-Owned Firm In Two Decades

A Hong Kong unit of Guosen Securities is in technical default on a dim sum bond issued in 2014, marking the first offshore default by a Chinese SOE since the collapse of Guangdong International Trust and Investment in 1999. The subsidiary says reports that it has violated a keepweel with its parent are "exaggerated."

Morons At The Precipice

Seven years of zero rates, massive monetary inflation and incessant market backstopping have desensitized and anesthetized. Rational thought ultimately succumbed to "perpetual money machine" quackery. And now all of this greatly increases vulnerability to destabilizing market dislocations, as senses are restored and nerves awakened. "A lot of this looks like late 2007 or early 2008," warns one manager, but today, market mispricing is systemic and global – virtually all securities classes at home and abroad.

Deutsche Bank Warns Bonuses Will Be Slashed As Much As 30%

A beleaguered Deutsche Bank is set to slash the investment bank bonus pool by some $566 million as John Cyran's effort to right a sinking ship continues. As Bloomberg reports, "no decision has been taken and the biggest reductions are likely to impact employees in the fixed-income business. Some managing directors may have their entire bonus scrapped, according to the person."

Frontrunning: October 19

  • Great News: China’s GDP Growth Beats Forecasts as Stimulus Supports Spending (BBG)
  • Oh wait, maybe not: China GDP: Deflategate Comes to Beijing (WSJ)
  • Actually, definitely not: Shanghai rebar falls to record low after weak China GDP (Reuters)
  • But who cares: European Shares Gain on Earnings as Bonds Drop, Metals Decline (BBG)

Scandal-Plagued Deutsche Bank Terminates Head Of I-Banking As Part Of Sweeping Restructuring

Moments ago, Europe's largest bank by assets and by gross notional derivatives, announced a raft of high-level management changes as part of an anticipated and sweeping restructuring of key divisions and senior-level committees. As WSJ reports, Colin Fan, the investment-banking co-head responsible for securities trading, will resign effective Monday. But the most profound change is that Deutsche Bank will split its investment bank into two pieces: one, focused on mergers and other deals, corporate finance and transaction banking services such as cash management, and the other on trading and global markets.

The New World Financial Disorder

The global Bubble is bursting – hence financial conditions are tightening. Bubbles never provide a convenient time to tighten monetary policy. Best practices would require central bankers to tighten early before Bubble Dynamics take firm hold. Central bankers instead nurture and accommodate Bubble excess. It ensures a policy dead end -  the faltering global Bubble has progressed beyond the point where Fed rate policy has much impact.

Lying CEOs Crash Their Stocks (So Will The Fed)

CEOs are not the most trustworthy figures in society. They will lay off thousands of employees to beat analysts' estimates, and yet they have no trouble looting the stock to pay themselves millions while the company loses money. However, one theme that keeps coming up is that unethical behavior has a price tag. With this in mind, consider the implications when the New York Fed tells us that economic activity declined because of the weather. Now that it's summer, it's not clear how cold weather is interfering. Perhaps the Fed has a South Pole subsidiary? When will the market crash and the Fed be replaced for lying about poor performance?

Corporate Buybacks: Connecting The Dots To The F-Word

Corporate executives offer three main reasons for share repurchases: 1. Buybacks are investments in our undervalued shares signaling our confidence in the company’s future; 2. Buybacks allow the company to offset the dilution of EPS when employee stock options are exercised or stock is granted to employees; or 3. The company is mature and has limited investment opportunities, therefore we are obligated to return unneeded cash to shareholders. The logic behind each of these explanations is in the vast majority of cases is flawed, to be kind, and deceptive to be blunt.


Walmart Chairman Steps Down As Amazon Market Cap Breathes Down Retailer's Back

Moments ago, the biggest single employer in the US after the Federal government, with 2.2 million workers, surprised its shareholders when it announced that Rob Walton, who had served as Chairman of the Board since 1992, was stepping down (he will stay on as a director) and would be replaced with vice-Chairman Greg Penner, grandson of founder Sam and son in law of Rob, who started his career at Goldman Sachs before joining WMT as a management trainee.

Days Of Crony Capitalist Plunder - The Deplorable Truth About GE Capital

GE’s announcement that its getting out of the finance business should be a reminder of how crony capitalism is corrupting and debilitating the American economy. The ostensible reason the company is unceremoniously dumping its 25-year long build-up of the GE Capital mega-bank is that it doesn’t want to be regulated by Washington as a systematically important financial institution under Dodd-Frank. Oh, and that its core industrial businesses have better prospects. We will see soon enough about its oilfield equipment and wind turbine business, or indeed all of its capital goods oriented businesses in a radically deflationary world drowning in excess capacity. But at least you can say good riddance to GE Capital because it was based on a phony business model that was actually a menace to free market capitalism. Its deplorable raid on the public purse during the Lehman crisis had already demonstrated that in spades.

The End Of Guitar Center (And An Irrational Addiction To Growth & The Scourge Of Unregulated Structured Finance)

The fact is, the die is cast. In a couple of weeks, Guitar Center will need to report its Christmas performance to its bondholders. If things do not look good, its bonds will be ripped apart like RadioShack’s. Here’s what this really means: it’s the end of big box retail, an irrational addiction to growth, and the scourge of unregulated structured finance. For a few years, unwise urban planning and unregulated banks created a new bubble in the American suburbs. The objective truth is that the growth of the last decade was financed by banking fraud, and that financial trickery of this sort only fools people in the short-term. Eventually, you must have a product people demand, sold by competent people who care about the business, financed in a way that makes sense.

"Cheerful" Dutch Financier Becomes 4th ABN Amro Banker Suicide

Following the deaths of 36 bankers last year, 2015 has got off to an inauspicious start with the reported suicide of Chris Van Eeghen - the 4th ABN Amro banker suicide in the last few years. As Quotenet reports, the death of Van Eghen  - the head of ABN's corporate finance and capital markets -"startled" friends and colleagues as the 42-year-old "had a great reputation" at work, came from an "illustrious family," and enjoyed national fame briefly as the boyfriend of a famous actress/model. As one colleague noted, "he was always cheerful, good mood, and apparently he had everything your heart desired. He never sat in the pit, never was down, so I was extremely surprised. I can not understand." Most believe that the suicide is not related to his work at the bank, but a former colleague had noticed that on his Facebook recently changed its job title to "former." Chris leaves behind a son - who had recently been cleared of cancer.