20120813-070311.jpgGood morning

The headlines:

  1. Standard Chartered settles the New York dispute.

    Link: for $340 million.

    It’s the trouble with public defamation: at some point, the truth becomes irrelevant, and the cost is all that counts.

    $340 million for Mr Lawsky to go away and shut up and let you continue with your NY banking licence? Cheap at the price. Because even the whisper of that banking licence disappearing did this to the share price (the bottom point):

    And the point of this is that the market capitalisation* of Standard Chartered hit about $29.4 billion (by my calculations) when Mr Lawsky got all up in their grill on August 6. When the markets heard about the settlement yesterday, market cap rose to $32.7 billion. $340 million for a recovery of $3.3 billion?

    It sounds…so rational.

    And a lot like “bad publicity” is no longer about the principle. It’s more of a natural disaster that is no longer within the bank’s control (and, in general, it looks like Monsoon season for the banks).

    But that was only a settlement with the New York Department of Financial Services. The Federal authorities, etc, still need to decide what they’re doing.

    *Share Price x Number of Shares in Issue = Market Cap (it’s often interpreted as the “value” of the company).

  2. Knight Capital’s loss was caused by dormant software.

    Link: that hugely awkward moment.

    So that software error that caused the $440 million loss in a day’s trading, and Knight Capital to sell herself over the weekend, and this:

    Dormant software.

    That got activated by the new software unexpectedly. And started multiplying stock trades by 1,000.

    We’ve had a lot of software issues this year. The cancelled BATS IPO (when the exchange f**ked its own exchange); the Nasdaq-Facebook IPO debacle (from which neither has really recovered)…

    I suppose it’s nice to round everything off with a company that isn’t offering itself to the public, and then ends up offering itself up anyway.

  3. The purchase of European bonds.

    Link: and the recovering yields of the Spanish.

    Bloomberg is saying that Spanish Bond Yields are recovering on the prospect of a bailout. So I went on a little search for 10 Year Government Bond Yields, always remembering that higher yields equal lower prices (or, rather, the higher yield indicates that there is a greater risk of default, and therefore investors want more “interest”/yield to compensate for that risk).

    Here’s Spain:

    That’s the Spanish. And I guess that, if you’re in the mood for optimism, there does seem to be a slight lowering of the yield right at the end of the graph. But, you know, a slight recovery from the peak – nothing like a recovery to 2009 prices. Or 2010 prices. Or 2011 prices. Or most of the prices from 2012.

    For fun, here’s the Greek and the German graphs:

    Looks like improvement until you look at the axis label. Jeepers. 25% per year?!

    And ze Deutsche:

    Yip. Look at all the investors flocking to the Bundesbonds.

    And if we look at the German Yield Curve (being the different interest rates required for different lengths of time – because you’re probably going to get higher yields on longer term bonds than on the short-term stuff):

    We see those negative bond yields that everyone is going on about. Investors willing to pay for the privilege of holding German treasuries; rather than the German Government paying for the privilege of borrowing the investors money.

    It’s all fascinating – and I really just included it to have a look at the graphs!

  4. BP is selling oil fields in the Gulf of Mexico.

    Link: looking for $7.9 billion.

    BP is attempting to dig itself out of its oil spill hole:

    Which can be seen above as a that ditch in the share price, and the corresponding soaring peak in traded volume**.

    They’re saying that these oil wells that they’re selling are “non-strategic”, despite the Gulf of Mexico being the source of some of BP’s most lucrative output. And according to CEO Bob Dudley, BP is divesting from these oil wells (in the Gulf of Mexico) to “really focus our Gulf of Mexico footprint”.


    I assume that he’s using the word “focus” there to mean “concentrate and/or reduce”.

    You do wonder though: if you’re divesting from “non-strategic” wells because you want to focus on strategic ones***, who would want to buy the non-strategic ones?

    That said, oil welling is capital-intensive****. Maybe BP is a bit tired of pouring capital in the Gulf and reaping fines and public outcry. Time to let someone else with a bit more capital have a punt?

    We shall see.

    **As investors did the hot-stove scramble to shimmy the out of their positions in the stock.

    ***I also assume that “strategic” is a euphemism for “profitable”. 

    ****Which is actually a GIANT euphemism for COSTS AN ENORMOUS AMOUNT OF MONEY even by Big Oil standards.

That’s all for now.
Have a good day.