Some Banking News
Bank stocks are making a comeback you guys: “with yields expected to keep climbing as the economy improves and as the Fed begins to embark on a multi-year process of policy normalization, the environment for bank stocks is brightening.” You’re probably sitting there thinking “sure, fine — But what inning?!” “We’re only in the fourth inning of credit demand,” says banker. Nice. Meanwhile, foreign exchange rigging is $5.6 billion under the bridge (alt): “the DoJ said that between December 2007 and January 2013, euro-dollar traders at Citi, JPMorgan, Barclays and RBS — who described themselves as members of ‘The Cartel’ — ‘used an exclusive electronic chat room and coded language to manipulate benchmark exchange rates’…the total penalty being paid over forex now exceeds the approximately $9bn paid to settle the Libor rigging claims. The banks settling the forex allegations…are hoping that Wednesday’s deal will enable them to finally draw a line under both affairs.” Meanwhile, “nearly one in five [financial service professionals] feel financial service professionals must sometimes engage in unethical or illegal activity to be successful in the current financial environment.” Also, “the number of people working in the securities business nationally has returned to 2007 levels, as has the gap between the compensation of Wall Street workers and that of everyone else…Average pay per full-time worker in the securities industry averaged 2.2 times that of the average American worker for the 70 years that ended in 1999 and peaked at 4.2 in 2007. It has rebounded to 3.6 times as high in 2013, and looks likely to have risen further since then.” But you guys, “it is unfair to suggest the entire industry is a den of thieves…Structurally, Wall Street firms carry much less risk than they did years ago. Capital requirements are significantly higher.” Indeed. “It might be thought that [diminished liquidity in markets] is an unintended consequence of regulation…But comments from Bank of England Governor Mark Carney last week suggest investors should think again: this may be a feature of the new world, not a glitch…A vital part of this argument is that due to the regulatory overhaul of the financial system, markets have to bear liquidity risk — and should charge to do so…This is difficult for markets to reflect, however…as the assumption of abundant central-bank supplied liquidity has driven down the premium charged for investing in illiquid assets.”
Dear China: We’ll Be The Judge
Here’s something people are really focused on: “The decline of Hanergy Thin Film Solar Group Ltd. was as spectacular and inexplicable as its ascent. Just 24 minutes of Hong Kong trading erased $18.6 billion of market value and wiped out almost four months of gains that made it more valuable than Sony Corp. of Japan.” Apparently the chairman missed the shareholder’s meeting and everything exploded. Bubbles, amIright?!
EU: What Bound Rout?