Good morning
The headlines:
- All the Jamie Dimon unspeakable awesomeness at the Congressional hearing.
Link: He fires back, and makes a fiscal cliff prediction.
Wrote about it here.
- The Credit Index said to have caused the JPM trading losses is shrinking.
Link: Unwinding the bet.
The index has dropped to its lowest level in three months. This suggests one of two things – either the fundamentals indicate lower likelihood of default (unlikely), or traders are liquidating their positions (likely).
The net notional exposure of the index when Iksil was suddenly famous was about $150 billion. Currently, it sits at about $138.4 billion. For the record – “net notional exposure” is the maximum amount of money that would have to be settled should the companies included in the index go into default.
The only real reason that this is interesting is because JPM is stuck in there somewhere.
- Tsipras thinks Greece will remain in the euro even if he wins.
Link: So what if I repeal austerity?
Nothing like audaciousness.
The subtext here reads: “Greece can do as she likes and the Eurozone won’t kick her out”.
Technically, of course, that’s true. In terms of the current treaties, there is no expulsion clause. Greece will stay if she wants and leave if she wants. The real question is: what will the Eurozone do collectively if Greece decides to be obstinate*?
After some quiet reflection, I have no real answers.
Other than “break the treaty”.
- The LIBOR collusion scandal continues.
Link: But the individual traders probably won’t be charged.
For the full story, I posted on the LIBOR collusion here. Governments everywhere are investigating – but in Britain, the heart of the LIBOR, the story is that the individual traders are unlikely to face criminal charges.
Mostly because, in order for criminal charges to be filed, the prosecutors would need to demonstrate that the traders successfully manipulated the interest rate. Manipulate – yes. Successfully – not so much.
Much easier to conduct a civil suit. The aim of the FSA** is to achieve “creditable deterrence”. Taking their money and lifetime bans from trading…
Yes. That should work.
- Procter & Gamble should break up.
Link: Too big to earn?
Analysts from Sanford C. Bernstein & Co*** are saying that P&G should break up if they don’t improve their earnings this year.
According to their calculations, P&G is worth $208 billion as a sum-of-the-individual-parts valuation, versus a current market value of $171 billion. That’s just not good enough by Wall Street standards. Or by any standard.
It’s the standard story of a conglomerate creating inefficiencies by having too many brands on the go. Braun, Oral B, Dolce & Gabbana, Duracell, Gillette, Hugo Boss, Olay, Pampers, Pringles, Tampax, Tide. To name a few. How do you coordinate all of that effectively?
It just creates too much room for failure to be sheltered under the wings of more successful lines.
- Spain and Cyprus have their credit ratings cut.
Link: Moody’s trying to affect the mood.
Three levels for Spain, two for Cyprus. It’s all sounding fairly standard.
That’s all for now.
Have a good day.
*Stand-offs. They’re so productive and good for relations. As is sarcasm.
**Britain’s Financial Services Authority – who is performing the British investigation.
***An investment management firm. Or, at least, the sell-side research side of an investment management firm.
