Financial News

[southsider2k5]

What does this have to do with my statement?

 

I didn't say "people" shouldn't care. I spoke for myself. As in, *I* don't care. And it has nothing to do with what company he runs...my only point is he's 81 years old. He has an illness...and? He's 81! He's at the age where you get...illnesses. It would be news to me if it was Mark Zuckerberg...a young man. This is not the case.

 

Anyone investing in BRK knows, or at least should know, that the person running it is 81 and time isn't slowing down. It's just not a surprise when old people get sick...it's expected.

 

You give people a lot more credit than I do.

[Balta1701]

A very interesting graphical look at how moves in a number of markets have become much more highly correlated since the 2008 collapse, and how it makes true diversification of a portfolio much more difficult because everything is moving the same way.

[Balta1701]

The NYT ran a big piece today on a seemingly fairly major international bribery scandal involving the now-CEO of Walmart.

[StrangeSox]

Sigh. Another SS Trustee report, another round of people claiming SS will be "bankrupt" in a couple of decades.

 

Eliminate the regressive tax cap and SS is fully-funded through any of our lifetimes.

[Balta1701]

Frontline did another just stellar look at the meltdown and the shadow banking system/derivatives market tonight. I'll add a link or video tomorrow.

[StrangeSox]

Frontline did another just stellar look at the meltdown and the shadow banking system/derivatives market tonight. I'll add a link or video tomorrow.

[removed snark]

 

Frontline is the best show on television

Edited April 25, 2012 by StrangeSox

[Balta1701]

Well, the good news is that it sounds like at least a portion of the stolen funds will remain stolen. As it should be.

Investigators probing the collapse of bankrupt brokerage MF Global said Tuesday that they have located the $1.6 billion in customer money that had gone missing from the firm.

 

But just how much of those funds can be returned to the firm's clients, and who will be held responsible for their misappropriation, remains to be seen.

 

...

Roughly $700 million of the missing money is now locked up with MF Global's subsidiary in the United Kingdom, where Giddens and his team are engaged in litigation to have it returned to U.S. customers. Giddens said he is "reasonably confident" that these funds will be recovered, though he added that it will be a lengthy process with no guarantee of success.

 

Another $220 million was transferred inadvertently from the accounts of securities customers to those of commodities customers. That money is now in limbo amid a dispute over which customers it belongs to, said Kent Jarrell, a spokesman for Giddens.

 

The final $680 million or so was transferred to other financial institutions with which MF Global did business, including a substantial portion that went to JPMorgan (JPM, Fortune 500).

 

Giddens said his team has "a solid basis for seeking the recovery of some of the funds that were transferred to JPMorgan," and is engaged in ongoing talks on the issue. JPMorgan did not immediately return a request for comment.

[Balta1701]

[removed snark]

 

Frontline is the best show on television

Here's part 1:

Watch Money, Power and Wall Street: Part One on PBS. See more from FRONTLINE.

 

I hadn't heard the Georgia story at all, or some of the details about how these setups were originally designed and how they rapidly began to be abused. This was a really great telling of how this industry blew itself up while getting government to turn a blind eye.

 

I haven't gotten to Episode 2 yet.

 

Watch Money, Power and Wall Street: Part Two on PBS. See more from FRONTLINE.

[mr_genius]

Protestors present Obama job czar with $26.5 billion tax bill

 

http://www.detroitnews.com/article/2012042...|text|FRONTPAGE

[Balta1701]

I'd say the real story buried in part 2 is how little the regulators actually were allowed to know about the system after the "modernization act" discussed in part 1. Prior to this, the fact that they were making decisions midnight on Sunday seemed reasonable, but that shouldn't have been the case at all...there shouldn't be a way to operate a system so in the dark that the only way you find out how bad things could be is Sunday night before everything collapses on Monday. And also, the McCain/White House gambit discussion was just a little amazing.

[Balta1701]

This probably counts as the most thought-provoking thing I've read this morning and I'm going to also be interested to see if any of the financialtypes here try to smack it down.

The latest business innovation from the perennially struggling airline industry is that this morning Delta announced that it's going to purchase a recently idled oil refinery near Philadelphia. All the press coverage of this I've seen echoes the company's official line that this is a smart way to deal with the rising cost of jet fuel. But if that's true, it seems like a damning indictment of an American financial sector that for all its talk of innovation is supposed to be in the business of creating more elegant solutions to these kind of problems.

 

Airlines buy jet fuel from refineries, who manufacture jet fuel after purchasing crude oil. So airlines lose out if either the refineries' spread goes up or if the price of crude oil goes up. If you merge an airline with an oil refinery, than the merged entity still loses out if the price of crude goes up. What you've done is created a merged entity that's less exposed than an independent airline would be to an increase in refineries' profit margins. On the other hand, the merged entity is also less exposed than an independent airline would be to the benefits of an decrease in refineries' profit margins. And the price—$100 million to buy the refinery and $150 million in new investments to improve its infrastructure—is a rather expensive way of switching one risk for another. The state of Pennsylvania is kicking in an additional $30 million to save the jobs at the refinery, which sweetens the pot, but presumably a similar amount of subsidity would have been available for anyone willing to keep operating the plant. There's no special reason there to combine it with an airline. In fact, what Delta is trying to achieve here is supposed to be what financial markets are for. The airline wants to tweak its risk exposure and is willing to pay hundreds of millions of dollars for the privilege. They should be able to spend that money hiring some clever folks to engineer the right set of market bets to achieve the level of risk exposure that Delta wants. That way you achieve the hedging without taking on the practical diffculty of a company with no fuel manufacturing experience entering a highly technical new line of business.

 

But in a phone briefing with reporters, Delta CEO Richard Anderson claimed that "What we're tackling here today is the jet crack spread, which you cannot hedge in the marketplace effectively."

 

Now it's possible Anderson is simply mistaken about this somehow, though if that's the case whoever it was from JP Morgan who advised Delta on the deal really should have piped up. But if we take him at his word, it looks like a very clear example of a case where finance has the theoretical capacity to provide value to the real economy and then is simply failing to do so. For a really big company like Delta, going out and buying a manufacturing facility can work as a second option but lots of individuals and businesses don't have that kind of scale. Meanwhile, I do think it's interesting that Pennsylvania's very conservative governor seems to suddenly have no problem with public sector job creation spending as long as it's possible to engineer the stimulus as a form of financial assistance to an oil refinery.

[southsider2k5]

This probably counts as the most thought-provoking thing I've read this morning and I'm going to also be interested to see if any of the financialtypes here try to smack it down.

 

I think it is a great idea, you just have to hope the white house doesn't deem it a vertical monopoly like Standard Oil.

[Balta1701]

I think it is a great idea, you just have to hope the white house doesn't deem it a vertical monopoly like Standard Oil.

More specifically, you have no reaction to the statement that it is not possible to appropriately hedge against price variations on the open market?

 

The writer isn't wrong in one sense...Delta Airlines has no more business running an oil refinery than Pepsico had running a brand of restaurants. They don't have the expertise in running it, they're going to have to bring in a whole lot of people to do so at high cost. This seems like something basic that the financial industry ought to be able to do. The only way I could get around that is if the state subsidy is really so huge, but again, why wouldn't a firm with experience running oil refineries be able to take thsoe subsidies and restart the facility at a lower cost because of built-in expertise?

[southsider2k5]

More specifically, you have no reaction to the statement that it is not possible to appropriately hedge against price variations on the open market?

 

The writer isn't wrong in one sense...Delta Airlines has no more business running an oil refinery than Pepsico had running a brand of restaurants. They don't have the expertise in running it, they're going to have to bring in a whole lot of people to do so at high cost. This seems like something basic that the financial industry ought to be able to do. The only way I could get around that is if the state subsidy is really so huge, but again, why wouldn't a firm with experience running oil refineries be able to take thsoe subsidies and restart the facility at a lower cost because of built-in expertise?

 

Honestly I ignored the obvious left wing commentary and stuck to the meat and bones of the article. For me it means cutting out the middle man/men in the supply chain, which is always a cost benefit to a company.

[Rex Kickass]

I think it is a great idea, you just have to hope the white house doesn't deem it a vertical monopoly like Standard Oil.

It wouldn't fit the definition of vertical monopoly though. It would just mean having more control over their supply chain, no? I think this is a great idea. Not only are they essentially creating a hedge against higher whole sale prices for Jet-A, but the business is also likely to offset costs by being able to sell the leftover diesel and other petroleum products that come out of the same refining process for producing Jet-A.

 

I think the most important question here is whether or not the refiners will get flight benefits on Delta.

[southsider2k5]

It wouldn't fit the definition of vertical monopoly though. It would just mean having more control over their supply chain, no? I think this is a great idea. Not only are they essentially creating a hedge against higher whole sale prices for Jet-A, but the business is also likely to offset costs by being able to sell the leftover diesel and other petroleum products that come out of the same refining process for producing Jet-A.

 

I think the most important question here is whether or not the refiners will get flight benefits on Delta.

 

Fuel is a huge piece of their supply line. This action also gives Delta the ability to directly (at some level) limit supply to their competition, which is also a litmus test.

[Rex Kickass]

Fuel is a huge piece of their supply line. This action also gives Delta the ability to directly (at some level) limit supply to their competition, which is also a litmus test.

It shouldn't do that at all. They aren't buying an operating refinery, they are reopening a shuttered one.

[southsider2k5]

It shouldn't do that at all. They aren't buying an operating refinery, they are reopening a shuttered one.

 

I don't believe it will, but I can easily see a more liberal DOJ interpreting it like that with some of the rulings we have seen in the last few years.

[mr_genius]

Kinda bad jobs numbers out today

 

http://online.wsj.com/article/SB1000142405..._LEFTTopStories

 

and

 

http://www.zerohedge.com/news/people-not-l...ate-lowest-1981

 

People Not In Labor Force Soar By 522,000, Labor Force Participation Rate Lowest Since 1981

Edited May 4, 2012 by mr_genius

[Y2HH]

Kinda bad jobs numbers out today

 

http://online.wsj.com/article/SB1000142405..._LEFTTopStories

 

and

 

http://www.zerohedge.com/news/people-not-l...ate-lowest-1981

 

That's okay, they will revise them in a month when the fuzzy math kicks in and suddenly they'll be better.

 

Personally, I don't believe the way they measure "official" unemployment is valid in any regard, and it actually surprises me that people accept it. And when I say "they", I'm NOT talking about the Obama administration, but all administrations...as I believe they all calculate it in the same way.

Edited May 4, 2012 by Y2HH

[cabiness42]

That's okay, they will revise them in a month when the fuzzy math kicks in and suddenly they'll be better.

 

Personally, I don't believe the way they measure "official" unemployment is valid in any regard, and it actually surprises me that people accept it. And when I say "they", I'm talking about the Obama administration, but all administrations...as I believe they all calculate it in the same way.

 

Yes, the official unemployment rate has been calculated in the same way for a long time.

 

[Y2HH]

Yes, the official unemployment rate has been calculated in the same way for a long time.

 

Sorry, I had to edit my post and add the word NOT in there...made my sentence make more sense.

[southsider2k5]

On the bright side, this and Europe are killing the energy markets. Crude is down almost $5, and under $100. Gas is down almost 10 cent a gallon and under $3.

[Balta1701]

On the bright side, this and Europe are killing the energy markets. Crude is down almost $5, and under $100. Gas is down almost 10 cent a gallon and under $3.

It's a wonderful negative feedback. Economy tries to strengthen in Dec-Feb, gas prices shoot upwards, gas prices start putting crimp in economic growth, economy slows down as a consequence, gas prices start to drop, economy will start to strengthen in the next couple months in reply.

[mr_genius]

Frontline did another just stellar look at the meltdown and the shadow banking system/derivatives market tonight.

 

I just saw parts 3 and 4. It was really bad, extremely politically biased. I was very disappointed in Frontline.