Category Archives: Banks

Chart Of The Day: How 37 Banks Merged Into 4

Thanks to Alan Haggard, we have this quite striking chart today:

How 37 banks merged into 4

Video Of The Day: A Real Journalist Questions A Real Banker

This has become such a rarity, you really need to just put aside five minutes to watch this:

Drop Everything, Read This Now: Too Big to Jail, Too Big for Trial

Two items of highly recommended reading when you have a chance—one is the cover story from the current issue of the Atlantic Monthly, “What’s Inside America’s Banks?” by Frank Partnoy and ProPublica’s Jesse Eisinger; and the second is Matt Taibbi’s latest, “Gangster Bankers” in Rolling Stone.

Excerpting really won’t do either of these justice, so just put aside a few minutes while on the commute home or while waiting for the kids to finish ballet or during a flight delay or whatever other spare minutes you find yourself with and just read these. Both of them.

There will be a quiz on Friday.

And while you’re reading them consider this: isn’t strange that some of the very same investors who seem to have no problems buying in to the opacity of the US and European banking systems get cold feet when you bring them an openly high risk-high reward investment proposition in a less conventional market?

Sort of reminds me about some of these studies that show how psychopathic tendencies are linked to an inability to process fear.

Anyway forget about what the ratings agencies say. There’s risk everywhere. I guess the difference is that people prefer risks closer to home, even if they don’t understand them. Though by Partnoy’s and Eisinger’s accounting, it appears the tables are turning on this front too…

Here’s the link again to the Atlantic article and here’s the link again to the Rolling Stone article. You know, in case you didn’t believe me the first time. Or thought I wasn’t serious. I could not be more serious. Seriously.

Also, I am officially in love with Elizabeth Warren:

Chart of the Day: Investment Banks’ share of Emerging Markets

Is this really the best way to communicate this?

2013.02.14.IB market share in EMs

Sourced from Bloomberg.

Mexico’s last locally-owned bank, democracy today and PRI 2.0

When was the last time you heard a bank openly and unabashedly praise an incoming political leader or party? I’m not talking about some vast conspiracy thing here; I mean this quite literally. Imagine it: a new political leader is “democratically” elected and one of the largest banks in the country publicly praises the incoming political leadership, telling all its customers and investors and anyone else who will listen that a new day has begun and good times are here to stay. Sounds sort of…propagandistic, doesn’t it? Sounds like

Well, Banorte, which happens to be the last remaining fully Mexican-owned bank, has of late been sending out research notes with a level of subservience and puerility really unbecoming itself. In chronological order:

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Forecasting for the Masses: The Macro Outlook, as told to Mom and Pop

How do you know an investment trend has officially peaked? There’s the old legend about how John D. Rockfeller knew it was time to get out of the stock market when his shoeshine boy started giving him tips. More recently, I know a lot of people of the opinion that when you see an investment trend story in the New York Times, it’s time to close the position. Even more recently, Fast Company Magazine ran some stories about how Brazil is the “hot new” destination for American startup geeks…cue another curtain call.

So I was going through my inbox over the weekend when I noticed an email from my mortgage lender, Wells Fargo, with this subject line: “2013 Economic and Market Outlook for Ulysses De La Torre”.

Maybe this is a new thing, but nobody else I know receives this sort of thing from any commercial or mortgage banker of theirs. Very well then. Is everybody ready for this?

Ladies, Gentlemen, Buyers, Sellers, presenting Wells Fargo Advisors’ Investment Strategy Committee:

2012.12.17.WF Macro outlook 2

2012.12.17.WF Macro outlook 3

Because I really have no room for diplomatic euphemisms, let’s get right to the point: Fixed Income is where it’s at here. Continue reading

Theory vs. Practice: Confessions of a Microfinance Heretic

“Journalism,” George Orwell is supposed to have said, “is printing what someone else does not want printed: everything else is public relations.”

I don’t know if Hugh Sinclair realizes this, but despite lacking any formal journalism training, he has indeed committed an act of journalism in his recently published book, “Confessions of a Microfinance Heretic: How Microlending Lost Its Way and Betrayed the Poor.”

The book’s title is indicative of what’s inside and Mr. Sinclair does a nice job backing up his claims with well researched and annotated sources where the source is not his own decade of experience in the field. Among the basic findings:

  • Microborrowers at some of the industry’s poster child institutions pay interest rates considered usurious, extortionate and predatory in any other context, but somehow the microfinance canon has convinced a critical mass of people that this is the road to solving poverty;
  • Due diligence by American and European microfinance investment funds into microfinance lenders is all too often a joke, and not a very funny one;
  • In certain cases, financiers, some of whom represent the largest banks in the world, are aware of what are arguably unsustainable and unethical practices at microfinance institutions but turn a blind eye to them in the pursuit of greater yield.

And much, much more. Here’s a short list of what else this book is: jarring, jaw-dropping, infuriating, inflammatory, and yes, heretical. At the same time: enlightening, engaging, inspiring, illuminating.

And now here’s an even shorter list of what this book is not: bullshit.
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Cocaine Cowboys and the Modern Banking System

Jonathan Weil issues perhaps the strongest wake-up call so far in Bloomberg. Excerpting it really doesn’t do it justice, but here you go:

Let’s try out a novel idea: Banks that help drug cartels launder money and give cover to those tied to terrorism should be put out of business. Is that really so hard for everyone to agree on? Free markets have worked in the U.S. because we have the rule of law. It’s why so many investors from other countries want to do business here. When contracts are breached, courts can be accessed to enforce them. When individuals or companies commit crimes, they’re supposed to be prosecuted and punished. Continue reading

Hypocrisy is really bad, except when I practice it

Continued fallout from the Sandy Weill interview last week is one of those news items that I just don’t think can be discussed or examined enough. Jesse Eisinger of ProPublica nails it in the NY Times:

Those who are left defending the banking status quo are on an island. These are current bank executives — who can be counted on to change their views the instant they lose out in the corporate race and are booted from the organization with engorged severance packages — and the politicians and lobbyists who love them.

And so what? Supporters of change can win all the intellectual arguments they want; the structure of the financial system remains intact.
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Sandy Weill reminds the world that opinions are like assholes – everyone has one

If you read this blog with any regularity, and you haven’t seen the Sandy Weill interview yet, you kind of need to block out four minutes right now to hear it all. If you don’t have the time, after the jump are two quotes that should raise the eyebrows of anyone who has been market-conscious for the past 15 years.

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A 2008 view of the LIBOR scandal in real time

The Barclays LIBOR rate scandal is a big topic, which is why I began addressing it four years ago. I’ve just reached into my archives and dug up an old research note I wrote to some colleagues, dated May 2, 2008. Another day I’ll update this to be more applicable to today’s markets, but I thought it was first worth taking this brief trip down memory lane for the sake of having a frame of reference. So without further adieu, here’s where my head was on LIBOR four years ago, and I hope you’ll pardon the elementary nature of the charts at the end.

May 2, 2008

FOCUS : LIBOR Transparency

The British Bankers’ Association announced two weeks ago that it is reviewing how LIBOR is calculated for the first time in 10 years. Several concurrent and intertwined developments surrounding this have been underway for quite a few months now: Continue reading

LIBOR infographic for dummies

Courtesy of accountingdegree.net:

Run for Cover: Brazil’s credit blowout has officially begun

Moody’s downgraded eight Brazilian banks, bringing them in line with the country’s sovereign rating. The broad problem they all share, in a nutshell, is twofold: slowing economic growth and lower interest rates, the latter driven almost exclusively by the country’s own central bank and President Rousseff. The idea behind forcing lower interest rates was nominally to make credit cheaper to Brazilian consumers, but apparently there hasn’t been enough of an increase in lending to make up for the profit margin squeeze. Not helping the situation is a spike in household debt.

Also, Eike Batista’s oil firm lost 25% in market value after the company said its first two wells would produce less than one-third of anticipated estimates.

Also, the real is swiftly heading for 2.10 against the dollar for the first time since 2009.
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The Cost of Borrowing Chinese Money (Arab edition)

Imagine that you are a) not Chinese, b) need to borrow money to fund business operations and c) sitting atop 7 percent of the world’s proven oil reserves. In other words, you sell a product that everyone needs and that everyone is willing pay for in U.S. dollars. Why would you want to borrow Chinese money?
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Some advice for Goldman Sachs, Department of Public Relations

POP QUIZ:

In April 2010, Matt Taibbi, Rolling Stone writer, referred to the investment bank, G—— S— as “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”

A full two years prior, the investment bank G—— S—, launched a five-year $100 million campaign to educate and support women who run small and medium-sized enterprises in emerging economies by providing them with management and business training.

Who is this mystery investment bank? Give up?
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BTG Pactual IPO = World Cup Fever

Can you feel the excitement? Don’t kid yourself, this has World Cup Fever written all over it–BTG Pactual is going for the gold. Here’s an exercise: drop “André Esteves” with the word, “star” into Google and see what comes up. I’m serious. Or you can just take my word for it. Reuters refers to him as a “wunderkind” while Forbes prefers “swashbuckling”. I don’t doubt the man’s savvy, but really, media people, get a grip. And you wonder why the public holds you in such low esteem?

Anyway, this analysis compares it to Goldman Sachs’ IPO, which is a comparison I would court if I were Esteves, but I’m not sure how instructive that is for the rest of us. My knee-jerk reaction was how it will compare with the IPOs of some of the Chinese banks a few years back, but let me think about this some more. The more relevant point, as mentioned in the wunderkind article, might be about return on equity. In the meantime, seriously: World Cup Fever.