French President Nicolas Sarkozy says he’s tired of waiting for the European Commission to act, so late last night he said he’d implement the Commission’s proposed transaction tax of 0.1% on equity transactions by August. It’s not clear if he’ll push through the 0.1% on derivatives that the Commission is proposing, but he did say that if the European Commission does implement the tax, France will synchronize it to the pan-European one. (more…)
The days of outrageous Wall Street bonuses may be limited, depending on your definition of outrageous, of course. A recent Bloomberg story reported that Morgan Stanley, the owner of the world’s biggest brokerage, is capping cash bonuses at $125,000 and is deferring more compensation for senior level executives.
This morning I woke to the news that UBS, the giant global bank of Switzerland, suffered a $2 billion plus loss, allegedly because of a rogue trader on its London equities desk. If true, apparently UBS management didn’t get the memo on Barings or Société Générale, both of which suffered huge losses because of rogue traders and, in some ways more disturbing, bad oversight of traders.
News like this can lead the public to think all traders are rogues. That’s not the case. Fraudulent trading may cause these extreme losses, but bad trading can lose even more, and usually it’s cock-eyed executives with poor risk management that cause the most losses. (more…)
Economists can be an interesting group of people. Although they don’t like to be wrong, occasionally they will fess up when they’ve been way off the mark in the past. To an extent, that’s what happened at this year’s Capital Economics Annual Conference in Chicago. The conference kicked off with an admission from Capital Economics Managing Director Roger Bootle that they had been wrong in their forecast last year. Although they had said world economies would continue to be bad, reality was that economies were even worse than they had expected. (more…)
The day after the infamous downgrade of the U.S. credit rating by Standard & Poor’s, I had lunch with a long-time friend who has taught me much about the markets. I noted I was annoyed by what the agency had done and said people should dump McGraw Hill stock. She was more sanguine and said that S&P probably wanted to show some independence after the financial crisis of 2008 and its part in it. My response: Helluva time to show some spine.
And bad spine at that. As I read the S&P report and its sovereign committee’s reasoning behind it — in summary, Washington is broken — I admit to agreeing with some of the points. But as others have said, it should be the numbers, not the politics, that S&P is judging. Further, when a credit agency has been as much debased as S&P, its decision, to quote CME Chairman Terry Duffy, was “a joke.” (more…)
The Oracle of Omaha shook things up a little on Monday with an op-ed piece in the New York Times saying the rich should pay more in taxes. Some may argue that Buffett did not show a lot of backbone with his timing. If he wrote this as the GOP was holding the line on any new revenues during the debt ceiling debate or last year when Congress was battling to extend the Bush tax cuts to 2012, this would have had more impact. To be fair, however, this is not the first time he made this point. He has often noted that it is wrong that he is taxed at a lower rate than his secretary. (more…)
A large majority of companies holding U.S. Treasuries had “no intention of changing their holdings as a result of the S&P move [to downgrade U.S. credit rating to AA+],” according to a survey of members by the Association for Financial Professionals (AFP) AFP Survey-Reaction to U.S. Credit Rating Downgrade[1]. The bigger impact, according to a quarter of respondents who are made up of senior level treasury and financial professionals, is the United States being viewed as a less desirable investment destination due to the downgrade. (more…)
The Federal Reserve’s Federal Open Markets Committee (FOMC) shook up the markets with its statement on Tuesday that it would likely keep rates exceptionally low through mid-2013. This prompted three dissenting votes, which may have had more to do with the volatile reaction than the actual announcement. However, the announcement is pretty remarkable.
The Fed is telling us that it will maintain a zero interest rate policy—the same emergency policy that has been with us since December 2008 — for nearly two more years. (more…)
On “The Daily Show” last night, John Oliver reported on what has to be one of the most interesting stories to come out of the financial crisis. I don’t want to ruin too much for you, but it involves a big bank, foreclosure and repo men. I think you will be surprised how this one turns out. (more…)
As some of the first wire stories on Thursday’s market plunge began to come across my desk I was struck by one in particular. The headline said, “Geithner stays and the market tanks”.
I have to admit I found that amusing. You see, I had just posted a chart on our web site indicating how some significant technical support areas had been breached on the Dow Jones Industrial Average. I had been having a conversation with one of our contributors about this and he had indicated earlier in the week that the market could be facing a turning point.
