20120715-215832.jpgGood morning

The headlines:

  1. JP Morgan blames traders for mis-marking.

    Link: say what?

    JPM seems to be saying that the reason for some of the large losses is that the traders were intentionally mis-marking trades, masking losses of $5.8 billion*.

    Surely not. And even if that is the case – how did an internal/external auditor/manager not do a quick reasonability check at some point going “WOAH – that price they used seems a little different to the price I just saw tick across my bloomberg screen! You there with the ugly shoes. Pull up a chair and explain”?

    And if they didn’t, I’d still want to point the blame at JPM – traders will always want higher gains and/or lower losses; because those things equal getting-a-bonus. It’s the bank’s job to try make sure that the traders aren’t getting too “aggressive”.

    Which is exactly what JPM actually does, according to former executives. Which is why they’re confused.

    I doubt that it’s really that significant in the grand scheme of the losses. But I can’t really resist accounting-related news.

    *Let’s say the index is priced at $15. The trader aggressively values it at $16. If the trader bought into the index at $20 – the marked-to-market loss is $5, except they’re recording it at $4… Does anyone notice how this isn’t really marking-to-market?

  2. Glaxo buys the Human Genome for $3 billion.

    Link: in cash.

    This follows a three-month takeover battle where Human Genome was concerned that some stockholders might lose out because they bought their shares at an average price that was higher than the Glaxo offer price.


    What does that have to do with anything? Since when did you have to make a profit on your investment before you sell it?

    I feel like it might just have been posturing to raise the offer price. Which Glaxo did raise.

    So I guess it worked.

  3. The Anti-AIDS pill is approved in the US.

    Link: but is an unaffordable preventative really better than nothing at all?

    Truvada. It’s the first time I’ve heard of it** – but it lowers your risk of contracting HIV by 94% when taken regularly.

    It costs about $480 a year though. Which is well out of reach of most people in Africa.

    On the other hand – condoms. Which have a success rate of what – 97%?

    **I’m not sure what that says about my attitude toward safe sex… 

  4. The FSA testifies.

    Link: Barclays pushed the limits.

    Yes – but “pushing the limits” is not the same as “breaking the law”. So why are they saying it in such a self-righteous tone of outright condemnation?

    The FSA testified that Barclays was warned that it “aggressively interpreted rules, took advantage of complex structures and submitted misleading estimates of capital levels”.

    Someone needs to calm down with the euphemism. Because unless there are heavy doses of understatement there – it’s like criticising someone for taking advantage of a tax loophole.

    My opinion is: criticise them if they don’t take advantage of it.

    Other than the FSA, the former COO of Barclays also testified yesterday morning. Where he gave us this double-negative tongue-twist:

    “It did not seem an inappropriate action given it was coming from the Bank of England. The government were calling the shots.”

    Oh Bank of England. Thou art being maligned.

  5. North Korea’s military chief removed.

    Link: the rise of Kim.

    The removal of Ri Yong Ho (for “illness” reasons) is being proclaimed as a major shift in power.

    Since he took over from his father, Kim Jon-Un has been trying to deploy the military in infrastructure projects and/or economic initiatives. Which I think is kind of cool.

    Ri apparently disagreed. Shortly after the removal was announced, Kim thanked the troops for helping to build a hydroelectric plant.

    Sounds like an awesome way of keeping the peace.

That’s all for now.

Have a good day.