Some risk recap, courtesey of Capital Context.
After a turbulent week or two in global financial markets, as reality turned to relief and then back to a more ruinous reality among European sovereigns and their contagiousness, we note that the risk of the 30 most systemically important financial entities in the world has risen to a 13 month high. Let us see if some kind of intervention brings risk down from these elevated levels, like it has in the past.
As we would expect, European financials have the highest risk but it is noteworthy to see how rapidly the risk of Asian financials has run up over the last few months.
A little difficult to see but we note that Aussie banks (overlaid into the chart but not specirfically members of the FSB30) have risen very notably.
When broken down into region it is clear that Europe is the critical area for now as the rest remain further away from recent wides but this is more relative-value driven in our view as we see US financials heading into a tough earnings season that will suirely bring the realization that borrowing from LLPs will no longer be believed.
Google stock soars more than 10% in after hours trading as company beats consensus.
Google Inc. on Thursday reported that second-quarter net income rose to $2.51 billion, or $7.68 a share, from $1.84 billion, or $5.71 a share in the same period last year. The Internet search giant said net revenue for the period ended June 30 was $6.92 billion. Excluding one-time items, Google said that earnings for the quarter were $8.74 a share. Analysts polled by FactSet Research had expected Google to report second-quarter earnings excluding items of $7.84 a share, and $6.54 billion in net revenue
How Goldman’s seized DBS Partners. Bloomberg reports,
Goldman Sachs Group Inc. took over
the portfolio of DBS Partners LP, one of the largest independent
market makers for options on the Standard & Poor’s 500 Index,
after that firm declined to put up more collateral, according to
four people with knowledge of the transaction.
Goldman Sachs, which had served as DBS’s clearing firm,
asked banks and brokerages late last week to submit offers to
close out about 575,000 options that Naperville, Illinois-based
DBS previously owned, said the people, who asked not to be named
because the information is private. That figure equals about 4.3
percent of the 13.5 million S&P 500 contracts outstanding as of
yesterday, according to data compiled by Bloomberg.
DBS co-founder Eric Wojcikiewicz, known as “Eji” among
traders at the Chicago Board Options Exchange, owned contracts
that would have cost about $470 million to unwind as of the end
of last week, said three people familiar with the portfolio.
When Goldman Sachs asked him for more collateral, he opted
instead to turn over his portfolio, two of the people said.
“Eric was well-known as one of the largest players in the
pit with positions bigger than some of the banks’,” said Henry
Schwartz, president of Trade Alert LLC, a New York-based
provider of options-market data and analytics. “With this guy
gone from SPX, you might not see as much liquidity.”
In the midst of heated debates between the president and Congress over slashing government spending, three men sat down to a nice dinner with a couple of great bottles of wine in an upscale Washington, D.C., restaurant. Normally, such an event would not raise eyebrows in D.C., where restaurants are pricey and members of the Washington politocracy dine out regularly. But on the night of July 6, with the prospects of reaching a budget agreement hanging by a thread, there was nothing ordinary about this dinner.
One of the three men at the table, Rep. Paul Ryan of Wisconsin is the author of the Republican budget plan adopted by the House of Representatives in April. His plan proposes to gut Medicare by providing seniors with vouchers to buy private insurance, rather than paying for their health care directly, and to take health care away from tens of millions of middle-class and moderate-income Americans.
At the same time, the Ryan budget reduces corporate tax rates on the highest-income Americans from 35 percent to 25 percent. Thus, under Ryan’s plan, the wealthiest 5 percent of individuals and households are not only spared the need to sacrifice, they benefit from the sacrifices of America’s seniors and middle-income working families.
Ryan’s dinner raised my eyebrows that night at the restaurant, where I was enjoying a special birthday dinner with my husband. Ryan and his companions occupied the table directly across from us, and soon after arriving, they ordered two bottles of the most expensive wine on the menu, a $350 French grand cru Burgundy. At first we joked about it: What could you buy with $700? But thinking a little more about it raised uncomfortable questions about how many hours a person would have to work at different salary levels to earn $700 in a week.
From Gold Core,
Gold is trading at $1,592.14/oz, €1,122.17/oz and £987.62/oz.
Gold has risen to new record nominal highs at $1,594.45 per ounce and silver has surged another 3% to over $39 per ounce after yesterday’s 6% rise. Today’s London AM Fix gold fix was $1,592.50 £987.54 and €1,119.04 – all of which are new record nominal highs.
European stock markets are lower after Asian equity markets were mixed overnight with the Nikkei falling 0.27%.
European debt markets are under pressure this morning with Spanish and Italian bond yields rising towards 6% again.
Ireland’s 10 year and 2 year yields spiked to new record highs at 14.13% and 20.9% prior to sharp falls which had the hallmarks of sovereign intervention – possibly the ECB or China.
The U.S. had its Aaa bond rating placed on review for possible downgrade by Moody’s which cited the “rising possibility” that the debt limit won’t be raised on a timely basis.
Below stunning graphics of how trades are being executed these days. Best bid/offer, fair execution, best practice, client focus seem rather distant when you take a deeper look into how a trade is executed. Welcome to Algomania.
and below GM trading during last year’s Flash Crash.
Welcome to the World’s Greatest Hedge Fund. An insight into what they trade, how they trade and who runs the show. Fortune reports,
The bailout of the financial system is roughly as popular as Wall Street bonuses, the federal budget deficit, or LeBron James in a Cleveland sports bar. You hear over and over that the bailout was a disaster, it cost taxpayers a fortune, we didn’t really need it, it didn’t work, it was a failure. It has become politically toxic, which inhibits reasoned public discussion about it.
But you know what? The bailout, by the numbers, clearly did work. Not only did it forestall a worldwide financial meltdown, but a Fortune analysis shows that U.S. taxpayers are coming out ahead on it — by at least $40 billion, and possibly by as much as $100 billion eventually. This is our count for the entire bailout, not just the 3% represented by the massively unpopular Troubled Asset Relief Program. Yes, that’s right — TARP is only about 3% of the bailout, even though it gets about 97% of the attention.
A key reason for the rescue’s profitability is that the Federal Reserve System has already turned over more than $100 billion of bailout-related income to the Treasury, and is on track to turn over $85 billion more this year and next. That’s not something most people include in their math. On the negative side, we’re including what may be the first overall cost calculation of a special tax break that’s worth tens of billions of dollars to four big bailout recipients. And, of course, we’ve analyzed reports from the Congressional Budget Office, the Treasury, the Federal Deposit Insurance Corp., and other sources.
We’ll get to the detailed numbers in a bit. But for now, we’d like to remind you why the bailout exists. The revisionist idea that the bailout is the problem — rather than excesses in the financial system — is simply stunning to those of us who watched the financial crisis surface in 2007, when two Bear Stearns hedge funds speculating in mortgage securities collapsed, and reach a crescendo in September 2008, when Lehman Brothers went bankrupt. Many in the financial world applauded Washington’s decision to let Lehman go under — but that applause was quickly replaced by fear as unanticipated consequences of the bankruptcy surfaced.
Lehman’s collapse touched off a terrifying run on money market mutual funds when the Reserve Primary Fund announced it could pay holders only 97¢ on the dollar because of Lehman-related losses. Savers who’d considered money funds as safe as federally insured bank deposits stampeded for the exits, pulling out hundreds of billions of dollars. It took federal guarantees of more than $3 trillion of money market fund balances — bailout! — to stop this modern-day bank run.
Some hedge funds that used Lehman’s London office as their “prime broker” had their assets frozen, setting off a run on prime brokers Goldman Sachs (GS) and Morgan Stanley (MS) as U.S. hedge funds pulled out their assets to avoid getting frozen if either firm failed. Goldman and Morgan were close to running out of cash when the government saved them by making them bank companies with access to the Fed’s lending facilities. Bailout! Bailout! GE Capital (GE) was having trouble rolling over its borrowings, and was rescued by a government guarantee program. Bailout! Then there was American International Group, the now infamous AIG (AIG), which required a 12-figure rescue.