atp’s posterous

--- et ouais, pour ce faire des couilles en or post 2008, il fallait (1) avoir choppé le statut de bank holding company pendant la crise en évoquant le risque suprême de collapse intergalactique –statut traditionnellement réservé aux banques commerciales, càd celles qui prêtent de l'argent et qui du coup ont accès au financement de la Fed- et ensuite réfuter le business model de banque commerciale pour se concentrer sur celui de banque d'investissement –celles qui spéculent avec leur thune- mais tout ca government sachs et jp morgan vous l'expliqueront bien mieux que moi! http://www.nakedcapitalism.com/2009/10/quelle-suprise-banking-profits-might-be-due-to-big-government-subisdies.html ---

Actually, despite the somewhat churlish headline, the story “Bailout Helps Fuel a New Era of Wall Street Wealth,” by Graham Bowley at the New York Times, is a solid job of reporting and does not tiptoe around the issue of the big bennies that the financial services industry is enjoying and their role in creating outsized profits. It also makes a distinction, which has escaped many writers, that the firms that are doing really well are the big capital markets players, not conventional banks (or firms like Citi and Bank of America, that are capital markets firms with very substantial commercial banking operations). It was the markets that the powers that be were panicked to save (debt is now heavily intermediated on over-the-counter credit markets, vastly less on bank balance sheets than it once was). And with the subsidies directed mainly at shoring up credit markets and the firms that own and operate the crucial trading infrastructure, it should be not wonder that the players that were most deeply involved are showing the greatest gains.

The reason for the tart headline is that this view should be conventional wisdom by now (well, it is among folks who understand financial services, but not in the wider world). And it should have been widely commented on when first and second quarter bank earning came out,. Instead the meme was “isn’t it wonderful those banks we thought were dead are actually making money!” No one wanted to look to closely and ascertain that the pretty profits were the result of government props, not sounder fundamentals. The one who came closest to saying the truth was Meredith Whitney, who described the earnings as “manufactured” (recall the role of AIG swaps unwinds in 1Q results) but added that the banks could keep it up for another quarter or two.

The New York Times story warm up indicates that comparatively few are in on the role of the government support in the supercharged profits. The price provides a short recap and notes that the Federal aid is contributing to lofty bonuses:

It may come as a surprise that one of the most powerful forces driving the resurgence on Wall Street is not the banks but Washington. Many of the steps that policy makers took last year to stabilize the financial system — reducing interest rates to near zero, bolstering big banks with taxpayer money, guaranteeing billions of dollars of financial institutions’ debts — helped set the stage for this new era of Wall Street wealth.

Titans like Goldman Sachs and JPMorgan Chase are making fortunes in hot areas like trading stocks and bonds, rather than in the ho-hum business of lending people money. They also are profiting by taking risks that weaker rivals are unable or unwilling to shoulder — a benefit of less competition after the failure of some investment firms last year.

So even as big banks fight efforts in Congress to subject their industry to greater regulation — and to impose some restrictions on executive pay — Wall Street has Washington to thank in part for its latest bonanza…

Not all banks are doing so well. Giants like Citigroup and Bank of America, whose fortunes are tied to the ups-and-downs of ordinary consumers, are struggling to turn themselves around, as are many regional banks.

It is admittedly a high level treatment (for instance, it does not enumerate the various types of support, but does make clear it extends well beyond the TARP) but delivers its message in a clear, matter-of-fact, and unqualified fashion.

Some economists and bloggers have been on this theme (the extent of the subsidies and the lack of quid pro quo for the taxpayer) for quite some time, and their drumbeat continues. One salvo comes today from Jesse in “How Goldman Sachs Leveraged $70 Billion in Government Money For Record Profits.” While this is admittedly close to conspiracy theory, most investment professionals I know regard the latter phases of the stock market rally with great suspicion (too much end of day tape painting, too many heavy handed short squeezes, continued thin volume, and suspicious moves on indexes when they near levels that are significant to technicians). That of course begs the question, “If the market is being manipulated, how and by whom?” When I worked with the Japanese, it was widely known that the Japanese securities firms manipulated the markets and the politicians were tipped off early and bought stocks the brokers were about to ramp (look, if I as a mere gaijin heard about it, it was hardly secret). Yet when it came out in the Japanese media years later, it was treated as a huge scandal. I was and am perplexed that a widely-known practice could be treated as such a remarkable event. I regard much of this rally as a similar open secret, except how this is being carried out is a mystery (is this mere trader opportunism and brute force that looks like collusion, with the perps secure in the knowledge that the government won’t act against rule violations, since the outcome serves their interests, or something more deliberate?) [...]

--- ok, ok, j'achète. j'espère que je ne ferai pas bouger le marché du remnibi! http://www.gavekal.com ---

The usual suspects come to mind in regards to yesterday's US$ sell-off: 1) risk appetite is increasing; 2) the US$ carry-trade is being revived, as exemplified by a number of US$ fundraisings by emerging market companies (e.g., Vale's $1bn bond issue-see here), and 3) the (in our mind overplayed) worry that the Fed is debasing the dollar. Besides these explanations, however, there may be another major force behind yesterday's move-in a word, China. As we have mentioned in numerous reports this year (see The Return of Financial Sector Reform or The Policy Decisions That Matter Will Take Place in Asia), Beijing is undertaking a series of financial-sector reforms that will, ultimately, allow the country to accrue "capital productivity" gains. This process has been hastened by the global collapse in demand, because China recognizes that they need to replace the labor productivity gains that the export industry has offered over the past decades (workers moving from the field to the factory; imported technologies and management skills spreading from export sector to the broader economy, etc.). However, China cannot pull off financial sector reform while also denying its banks the experience that comes with international dealings. Thus we are also seeing increased capital-account liberalization, which in turn will subject the country's currency to greater market forces. That implies a strong a stronger Renminbi, and (as the market seems to fear) less demand for US$-denominated assets. This is a long-term, ongoing story, but in the past week the newsflow out of China has come thick and fast, while at the same time the Yuan is rising, hitting a four-month high. Consider just a few examples of recent headlines:

1) China increased the individual quota for foreign institutional investors into the A-share market: This move, coming on the heels of the A-share sell-off in August, sent a signal that China is supporting the stock market, and has no desire to withdraw liquidity from the system.

2) China Development Bank sets up a Rmb35bn private equity vehicle: Meanwhile, the head of Google China resigned to set up his own technology-focused private-equity vehicle, having collected funds from big names in global tech. These are on-the-ground reminders of growing momentum in China's financial sector.

3) Beijing to issue a Rmb6bn sovereign bond issue - in Hong Kong: This move is a follow-up on China's recent decision to anoint Hong Kong as the first off-shore center for Renminbi bonds. This will deepen the offshore bond market, provide a benchmark for issuers and may help to spur a more mature corporate bond market. Overall, it is yet another important step for the internationalization of the Chinese currency.

The issuance of an offshore sovereign bond has particularly caught investors' eye, because some see this as confirmation of a China plot to unseat the US$ as the world's reserve currency. But here we beg to differ. The US$'s status as the world's currency is not actually under siege, by China or anyone else (see Arthur's ad hoc here). China will not be fully opening its capital account in the next five minutes! The story here is a long-term, gradual one. But there is increasing evidence that China is committed to an external rebalancing and a reduction of the current account surplus. As a result, the Chinese currency will strengthen against the US$ over time-and big "China newsflow weeks," as we have seen in the past fortnight, serve to wake investors up to this reality. Nevertheless, just because China is busy reforming its financial sector, it does not automatically mean that the dollar will have to go to zero, especially against other currencies than the RMB.

---waow, bien inspirés de leurs amis colombiens, les ricains semblent avoir développé un nouveau model de machine à laver …  http://www.ritholtz.com/blog/2009/10/what-are-banks-doing ---

The question of whether banks in the aggregate are lending or not gets partially answered every Friday when the Fed releases the assets and liabilities of the US commercial banks and if they are not, what they’re doing with their deposits. For the week ended Sept 23rd, commercial and industrial loans outstanding fell for a 12th straight week to the lowest level since Nov ‘07. Lending also fell in residential real estate and credit cards but rose for CRE. Whether due to a lack of demand and/or concerns with the economy, banks instead bought mostly US Treasuries, Agency paper and MBS (guaranteed by FNM/FRE) as almost free money from the Fed has created a nice spread. Purchases of Treasuries/agency totaled $31.1b for the week, the biggest increase since Oct 22nd ‘08 when panic resulted in buying of $79b. Agency guaranteed MBS purchases rose by $17.8b.

--- …ou faudra-t-il attendre la fin des législatives allemandes pour que le feu prenne du côté de l'europe de l'est?   http://www.berninger.de/details/datum/2009/08/31/something-big-is-happening.html ---

European countries announce that they voluntarily increase the IMF´s funding

Alistar Darling announced an increase in IMF funds on behalf of british tax payers just hours after the German and French Finance ministers agreed to do so.

That indicates that there is big trouble on the horizon and "immediate" action is required in order to deal with it.

If current IMF funds of 750 billion Dollar are not sufficient to deal with new issues, then it must be the potential failure of a larger country.

At the same time we see tremendous movements in the Gold and especially the Silver markets. Prices are up, even though stocks still rally.

And in the US many expected that the FED announcement on bail-out funds receivers could damage the economy and lead eventually to a bank holliday.

All in all September seems to become a promising and exciting months.

Le tour de vis envisagé aux Etats-Unis et en Europe contraste avec l’attitude du régulateur suisse. Une différence qui pourrait encourager les gérants de fonds alternatifs à venir s’installer dans la Confédération

Les hedge funds et leurs gestionnaires sont de nouveau sur la sellette. La Commission européenne et le pouvoir exécutif du gouvernement des Etats-Unis ont, chacun de leur côté, soumis un projet de réglementation qui imposerait un contrôle direct de l’ensemble du secteur.

En ce qui concerne l’UE, le Projet de directive relatif aux gérants de fonds dits «alternatifs» (AIFM) vise à superviser plus étroitement les activités des gérants de hedge funds et de fonds d’investissement privés au sein de l’Union européenne.

De l’autre côté de l’Atlantique, le président Barack Obama a récemment annoncé un projet de réglementation de leurs activités aux Etats-Unis. Sa réforme les obligerait à se déclarer auprès de l’Autorité américaine des marchés financiers – la SEC – en tant que sociétés de conseil en placements financiers.

L’intérêt porté aux fonds alternatifs par les instances américaines et européennes découle des inquiétudes causées, à la fin de 2008, par l’endettement graduellement excessif du système financier ainsi que par l’impact d’un tel endettement sur le fonctionnement des marchés.

Depuis, la plupart des commentateurs ont compris que les hedge funds ne constituaient pas le catalyseur de la crise financière. Les organes de réglementation eux-mêmes – y compris ceux qui sont membres de l’Organisation internationale des Commissions de bourse (Iosco) – ont abouti à la conclusion que ces fonds alternatifs n’ont joué qu’un rôle mineur pendant la crise. Et qu’ils jouent un rôle positif sur les marchés financiers du monde entier, observation reprise par le régulateur anglais. En termes d’emprunts, il semble désormais communément accepté que ces fonds étaient et restent beaucoup moins exposés que la majorité des institutions bancaires.

Rétrospectivement, il est donc difficile de comprendre pourquoi les hedge funds sont l’objet d’un tel intérêt des régulateurs américains et européens. Bien que ces deux projets de réforme soient encore l’objet de débats, leur importance pour tous ceux qui travaillent dans le secteur ne réside pas seulement dans les détails de leur version finale. Elle est liée au fait, évident, que ces projets sont l’expression de l’attitude actuellement prédominante vis-à-vis des hedge funds à la fois aux Etats-Unis et en Europe, où se déroule la majorité de l’activité de ces fonds. Les deux projets ont été critiqués par les spécialistes du secteur, qui citent, entre autres problèmes, l’absence de consultation des entreprises concernées et le manque de compréhension de leur rôle sur les marchés financiers. Ces projets de réforme sont davantage le fruit d’une politique populiste que d’un travail de réflexion et de conception approfondi en matière de contrôle des risques financiers.

Cela ne signifie pas pour autant qu’aucun ajustement ne doit être apporté à l’architecture réglementaire du système financier mondial. En réalité, il semble qu’un consensus clair se dégage aujourd’hui quant à la nécessité de modifier la réglementation, mais il est impératif qu’une telle modification prenne en compte le rôle unique que jouent des hedge funds. Il semble ainsi difficile d’envisager la mise en place d’un système de réglementation approprié et efficace sans une étroite coopération de l’ensemble des parties intéressées. Ceci semble désormais compris par les régulateurs. Les engagements pris par les pays membres du G20 réunis à Londres au mois d’avril ont donné un nouvel élan à cet effort. De son côté, l’Iosco a récemment élaboré et publié de nouveaux principes de réglementation qui, à ce jour, ont été bien accueillis par l’industrie.

A la lumière de l’ensemble de ces initiatives, les projets de réforme annoncés à la fois par le président Obama et par la Commission européenne semblent, dans le meilleur des cas, prématurés, et dans le pire des cas, clairement hostiles à l’industrie des hedge funds. Sachant que ces projets de loi font suite à différents plans de mesures, réels ou potentiels, qui ne manqueront pas d’avoir une incidence significative sur le régime fiscal des gérants de hedge funds aux Etats-Unis et dans certains pays de l’UE, il n’est pas surprenant de constater que nombre de ces gérants envisagent sérieusement d’aller s’installer dans d’autres pays.

En réalité, la mise en place d’une réglementation additionnelle excessive – qui serait nécessairement coûteuse même si elle se justifie politiquement parlant – pourrait avoir des retombées positives pour la Suisse. En effet, le pays a organisé, à la fin 2007, des rencontres visant à rassembler les représentants du secteur, les instances de réglementation et les pouvoirs publics afin de renforcer son attrait et sa compétitivité auprès des hedge funds et de leurs gérants grâce à des réformes réglementaires et fiscales positives.

Concernant le débat sur l’instauration d’une supervision réglementaire directe de ces fonds, le régulateur suisse est d’avis que le système de supervision indirecte applicable par le biais de la réglementation bancaire des titulaires de comptes dépositaires auprès de hedge funds et des maisons de courtage de premier ordre est suffisant. Bien qu’il soit impossible de déterminer si la position du régulateur a changé ou changera à la lumière de la récente crise, rien ne permet de déceler en Suisse un mouvement populiste en faveur d’une réglementation directe des fonds alternatifs.

La question cruciale, pour le secteur relativement mobile des hedge funds, consiste peut-être aujourd’hui à savoir quels sont, parmi les différents pays encourageant actuellement de tels fonds alternatifs à venir s’installer sur leurs territoires, ceux qui sont capables de démontrer que leur gouvernement comprend et soutient une telle approche internationale et consensuelle. A cet égard, la Suisse semble très bien placée. Pour elle, l’enjeu n’est plus aujourd’hui de savoir si elle est capable d’attirer ces gérants, mais si elle parvient à gérer l’augmentation massive des demandes de la part de ceux intéressés à venir s’installer sur son territoire.