Is a nasty split in scorching public view the new normal for financial industry power couples? Experts see something brewing.» Read More
In the last 24 hours, many commentators have remarked upon the threat posed to financial markets by yesterday's Korean artillery exchange.
Their comments have been directed toward global markets in general—and to Asian markets in particular.
But what has been the actual short-term economic damage to South Korea — and how have markets priced that impact?
A Forbes blog Post , written by Robert Olsen, points out that the quantifiable hit maybe less than we anticipated:
What if the European Union broke up—and nobody bothered to tell you about it? Well, some are speculating that it has already happened.
Of course, the modality of this breakup isn't an ostentatious Inverse Maastricht Treaty . There have been no ribbon cuttings—nor televised photo ops of smiling finance ministers walking across a national border.
There hasn't even been the kind of somber debate, often heard on BBC News or C-SPAN, hashing out the various merits and disadvantages of such proposal.
It just happened—in the course of doing business.
As I observed in a piece about the possibility of a looming fiscal crisis in the United States : "The most powerful force in the universe isn't love: It's the bond markets."
So, how have the bond markets in Europe been driving a breakup inside the Union that few outside the world of sovereign finance have noticed?
The insider trading dragnet has sparked terror among the rank and file of Wall Street.
It's clear from what's been revealed in press reports that federal authorities have been wire-tapping many conversations between employees at big Wall Street firms and outside consultants. They may also have been intercepting emails.
This strikes fear in the hearts of many on Wall Street, who worry that an email may seem incriminating or may be personally embarrassing.
"If I went out late with a client, and we traded emails the next day about our 'crazy night,' it may not be the kind of thing we want splashed across the front page of the Wall Street Journal," one lower-level investment banker said.
The GOP rhetoric against the Fed shows no signs of slowing down this holiday season. Can you imagine what the dinner conversation would be at Thanksgiving Dinner with Representative Ron Paul, Federal Reserve Chairman Bernanke, Senator Bob Corker and Representative Mike Pence? Oh to be a fly on that table!
The Fed has been politicized like never before. Now some Capitol Hill lawmakers are arguing that its dual mandate—price stability and full employment—should be stripped. I decided to speak with Mark Zandi, chief economist of Moody's Analytics about all of this and what's his message to Congress.
MZ: I think the worst thing that could happen is if the Fed was politicized. An a-political Federal Reserve is a cornerstone of our financial system and broader economy. So nothing is more important than maintaining the Fed's independence. And the fact that its wrapped in the political process is just disturbing and disconcerting.
Avid business news junkies and hedge fund traders everywhere are probably dying to know what kind of wine John Kinnucan was drinkin’ when the Feds came “a knockin”. I know I was— so I asked him. “Nebbiolo”, he said. “An Italian red wine”.
Just in time for the holidays, the Feds are unwrapping a far-reaching, market rattling, potentially industry shaking insider trading probe. Familiar names including Janus Capital, Wellington Management and SAC Capital have been roped in. Also, unfamiliar names including one John Kinnucan, founder and sole employee of Broadband Research. John was our guest Tuesday on “The Strategy Session” with David Faber and Gary Kaminsky . John was also the focus of an article Monday in The Wall Street Journal that will change his life forever.
How will it change his life?
US companies are still sitting on a trillion dollar plus cash mountain, but this hasn’t changed the fact, some say, that they continue to squirrel away hundreds of billions of dollars in perhaps the least sexy of all places: the bank.
“You’re just not getting paid to do anything right now," says Brian Kalish, head of the finance practice at the Association for Financial Professionals. "You’re in this ultra low-yield environment...leaving the money in the bank isn’t costing you anything.”
If holding cash in the bank seems a bit…pedestrian, that’s because it kind of is. Many companies could be putting their short-term portfolio to work through a range of strategies, including agency securities, munis and asset-backed securities. But many are even passing on the king of low-risk investments—Treasury bills—as rock-bottom rates make tying up cash in short stints less attractive than the ease of having cash at hand.
S&P Cuts Irish Debt Two Steps, Outlook Negative (Bloomberg) The article quotes Standard & Poor's: "The Irish government looks set to borrow over and above our previous projections to fund further bank capital injections into Ireland’s troubled banking system," Hence, the cut from AA- to A for long-term, and the short-term grade cut from A-1+ to A1. According to the article, the negative outlook stems from"the risk that talks on a European Union-led rescue may fail to stanch capital flight."
Big Firms Now Inside Crosshairs of Insider Trading Probe \(Wall Street Journal\) As we reported yesterday, some of Wall Street's bigger players are now being investigated: "Hedge-fund giants SAC Capital Advisors and Citadel LLC, big mutual-fund company Janus Capital Group Inc. and Wellington Management Co., one of the nation's biggest institutional-investment firms, have received subpoenas from the Manhattan U.S. Attorney's office seeking trading, communications and other data as part of a broad criminal investigation, according to people familiar with the matter." One of the centers of the investigations seems to be the companies that provide "expert-network" services. The Journal article explains: "Such expert-network firms set up meetings and arrange calls between traders seeking an investing edge and current and former managers from hundreds of companies."
Some broad trends seem to have emerged from the Federal Open Market Committee meetings held on November 2nd and 3rd and released earlier today.
Parsing the cryptic language of FOMC minutes is never easy — because every point seems to have a counterpoint. But the minutes seem to suggest that most participants in the meetings are still concerned about growth and unemployment:
"Participants generally agreed that the most likely economic outcome would be a gradual pickup in growth with slow progress toward maximum employment. They also generally expected that inflation would remain, for some time, below levels the Committee considers most consistent, over the longer run, with maximum employment and price stability."
That would seem to suggest that the economy is growing, and unemployment is falling — but not as quickly as it should be. And that interpretation would seem consistent with recent policy actions taken by the Fed — namely a second round of quantitative easing.
Major selloff in equities on a dismal news day (MarketWatch) The bad news today was so varied that it's difficult to pick a single source of tribulation as the cause of a major decline in equities, both in the US and abroad. The day began with the beginnings of a major crisis on the Korean Peninsula — with North and South Korea exchanging mortar fire. Then, there were speculations about political instability in Ireland, driven by the broader story of a threatening European debt crisis. Next, a broadening of investigation in the United States into insider trading, which now includes large market players SAC Capital and Janus. Finally, a lowered forecast for domestic growth from the Federal Reserve.
The approach to insider trading that the government is lately employing got an interesting test today.
The government has reportedly been going after networks of experts and outside consultants that it says provide hedge fund traders with non-public, proprietary information.
Well, this afternoon, shortly before it was officially announced that shares of Janus Capital Group would stop trading pending a company announcement, the shares took a nose dive on spiking trading volume. In other words, a bunch of people apparently had the non-public knowledge that something was happening at Janus before it was announced.
Where did this information come from? If you look at the chart, the shares spike downward right around 1:48. So was some nefarious tipster letting his friends know about the pending halt and announcement?
Less cash flow from oil firms may pinch loan payments to banks but gas savings for consumers will create new business.
Some big news this week, including Russia and North Korea. Did any change the game for the market? NYSE floor trader Kenny Polcari weighs in.
Oaktree Capital's Marks thinks that the drop in oil prices could finally expose low lending standards.