"The next six months are going to be really turbulent. People need to proceed with caution," Professional psychic Mary T. Browne tells The Deal .
Another prominent market bull has joined the growing ranks of Wall Street strategists who think a correction is not far away.» Read More
Saturday's New York Times had an almost perfect piece of weekend business journalism detailing the practice of a family run knife-sharpener business.
There aren't many of these fellows left, the NYT's Robin Shulman says there are just 100 knife sharpeners in North America, so this is a rare look inside an otherwise closed society and business.
And what do we find? The knife-sharpeners largely come from the same area of Northern Italy. They still sharpen knives much the way their fathers and grandfathers did, although technology has sped up the practice. Even more importantly, restaurants now have duplicate sets of knives, which allows the sharpening to take place off site in a shop. Formerly, the sharpening was done curbside, in a truck.
Chief Goldman Sach economist Jan Hatzius says the recovery of late 2009-early 2010 was a temporary "firm patch" in the economy and now we're in for an anemic recovery, at best. There's also a "sizable risk" that we return to a recession. As a result, the Fed will pour another $1 billion in QE into the economy, probably through Treasury purchases.
Silver rallied an impressive 4.6% this week to settle at $19.92 per ounce, its highest close since March 17th, 2008 and its second consecutive week of gains.
Goldman Sachs is closing down Principal Strategies.
Kate Kelly broke the news that Goldman was preparing to shut down its large-cap equity trading group about a month ago. Bloomberg on Friday confirmed the story with two sources, adding the news that plans to spin Principal Strategies off into a hedge fund have been shelved.
Principal Strategies operated as kind of internal hedge fund, trading large cap equities with Goldman’s own capital and operating under the aegis of Goldman’s equities division. DealBook today described it as the "best-known — or, conversely, most infamous — investment bank proprietary trading desk" on Wall Street.
(Goldman’s other big prop trading operation, the Global Special Situations Group, operates under the Fixed Income, Currency and Commodities Division.)
A couple of years back, Goldman shifted about half of Principal Strategies—both traders and assets—to its asset management division.
This accomplished a couple of things. It allowed Goldman to take half of the risk of Principal Strategies off its books and to open the fund to clients. But since the firm had capital invested in the new created fund, called Goldman Sachs Investment Partners, Goldman in effect became a client of itself.
Of the things we knew over the years wouldn’t last—Brad and Jen, Britney and K-Fed, John and Paul—one breakup we thought we’d never live to see was the time-honored relationship between the S&P 500 P/E ratio and the 10-year note yield.
Yeah, in case you didn’t know the two trend lines have enjoyed a cozy relationship for the past 40 years or so, moving in lockstep in good times and bad, in market sickness and health, till death or a stock market crash do them part.
Ah, but we have seen the market tumble from its lofty highs, and this is where the divorce happened.
Since about 2006 the S&P yield went one way—up—and the 10-year yield another—down, way down. It’s to the point now where they are more than five percentage points apart and growing.
High yields, of course, indicate high danger, and low yields indicate safety. It is investor aversion to stocks and their growing love of bonds that has produced this phenomenon, pointed out to us this week by noted banking analyst Dick Bove.
“Bank stock investors, my special interest, simply do not want to buy bank stocks,” Bove said in research earlier this week. “They are no longer content with seeing banks drop their reserves to build common equity. They want to see a rise in revenues. This, unfortunately, seems unlikely near term because earning assets are not growing, net interest margins are under pressure, non-interest income is expected to fall, and banks have done a very poor job controlling costs.”
So the financial sector was a big fail in August.
Global banking regulators may be close to reaching a deal on bank liquidity requirements that could saddle the U.S. taxpayer with supporting Fannie Mae and Freddie Mac for eternity.
The committee drafting the new Basel III rules will meet in Switzerland next Tuesday. A final set of rules is expected to be agreed on September 12. The leaders of the Group of 20 nations are expected to endorse the rules when they meet in November.
A little noticed change in the proposed rules, however, could throw a monkey wrench into plans to reform Fannie and Freddie, the two mortgage giants that have spent the last two years on government life-support. So far, U.S. taxpayers have been forced to pony up around $150 billion for Fannie and Freddie, and the Congressional Budget Office says that the total cost could amount to three times that much.
Policy makers who hoped to eventually remove the costly government subsidies and guarantees for Fannie and Freddie will run into a stumbling block, however, if the Basel III rules are implemented. That’s because Basel III includes a liquidity requirement for banks that will encourage them to buy the debt of the Fannie and Freddie as well as the mortgage-backed securities they back.
The new liquidity regulation—sometimes known as “The Bear Stearns Rule”—is intended to make sure that banks have enough “high-quality liquid assets” to survive a temporary credit crunch. Specifically, the banks will be required to have enough high-quality liquid assets to fund 30 days of capital outflows under a stress scenario.
Right from the start, the way the Basel Committee defined “high-quality liquid assets” was problematic. It included cash and central bank reserves, relatively non-controversial highly liquid assets. But it also included sovereign debt, a move that would inevitably encourage banks to hold more sovereign debt than they otherwise would. This is problematic for two reasons—it created an implicit subsidy for spend-thrift governments and it created the danger of over-exposing banks to sovereign defaults.
Forget the boutique firms and hedge funds. If you're in the banking industry and looking for a new gig, there's now another option: open a shot-girl business.
CNBC's Patti Domm and Jeff Cox discuss the jobs report and the current dilemma of long-term unemployment.
CNBC's Patti Domm and Jeff Cox discuss the recent GDP numbers and what factors have been affecting it.
Investors give and investors take away, and nowhere has that been more true lately than in value stocks.
Pershing Square Capital Management clients aren't very concerned about Herbalife's big gain yesterday.
Summer associates on Wall Street are no doubt learning a lesson this week about how to think like a trader when the world is on fire.
JPMorgan Chase is close to a deal to sell half its private equity business, the Wall Street Journal reported, citing people familiar with the matter.