Tomorrow we have Jobs Friday, International Trader and Consumer Credit. Quiet trading day —- a 10 handle trading range and looking at a 2 way trade tomorrow. Low volume killing the game right now. ESH is back and filling… Fridays have not been kind to the S&P this year; up 3/down 6 out of the […]
Target Corporation (NYSE:TGT) recently welcomed the financial community to discuss its strategic and financial plans and to provide guidance for the coming periods. Credit Suisse issued its report on the company discussing its take on the major disclosures of the event. Credit Suisse reiterated its Neutral rating on the stock and chose not to revise […]
Daniel K. Tarullo, the Fed governor who oversees regulatory policies, at a Senate panel last year. Credit Alex Wong/Getty Images
The nationâ€™s largest banks appear to have the financial strength to survive a nightmarish world where unemployment soars, house prices plummet and Wall Street crashes, the Federal Reserve said on Thursday.
The Fed requires big banks to undergo â€œstress testsâ€ each year that aim to assess whether the institutions would be able to withstand the sort of economic and financial storm that ripped through the country more than six years ago.
Put simply, the tests add up the losses that a bank would suffer on its loans and trades during the hypothetical storm. The Fed then assesses the degree to which those losses would deplete a bankâ€™s capital, the financial foundation of every bank.
Some of the 31 banks in this yearâ€™s test would emerge from the theoretical shocks with significantly less capital than others. Under the tests, Goldman Sachs fell very close to a minimum requirement for one measure of capital. Zions Bancorporation, which fared poorly in last yearâ€™s tests, also fell very close to a minimum level.
The Federal Reserve released projections of each bankâ€™s ability to withstand a severe recession and other shocks over the next two years. A bank capitalized below 5 percent would be in danger of failing.
The minimum percentage that each bank is
capitalized, or its ability to absorb losses.*
Discover Financial Services
The Bank of New York Mellon
PNC Financial Services
Santander Holdings USA
HSBC North America
31 participating banks
MUFG Americas Holdings
Fifth Third Bancorp
Bank of America
BBVA Compass Bancshares
Bank of America was well above all the minimum requirements.
Unlike last yearâ€™s test, this one showed no bank with capital below the minimum, a result that might provide comfort to the Fed as it seeks to make the financial system stronger.
â€œHigher capital levels at large banks increase the resiliency of our financial system,â€ Daniel K. Tarullo, the Fed governor who oversees regulation, said in a statement. â€œOur supervisory stress tests are designed to ensure that these banks have enough capital that they could continue to lend to American businesses and households even in a severe economic downturn.â€
The results on Thursday represent only the first stage of the tests, however. In many ways, the second stage is more important to the banks. Next Wednesday, the banks will find out if the Fed has approved their plans to distribute capital to shareholders through dividends and stock buybacks. Banks that fell close to minimum capital levels on Thursday may have to scale back their requests to pay out capital, in order to avoid going below the minimum thresholds.
The Fed may, however, object to a capital payout request if it judges that a bank has not participated in the stress tests with sufficient thoroughness.
When the Fed objects to a capital payout plan, it is deemed to have failed the stress tests. Last year, Citigroup failed because the Fed objected to the quality of its internal stress testing process.
An American unit of Deutsche Bank, the German bank that has recently come under much regulatory scrutiny, was included in the stress tests for the first time this year. It had the highest capital after the stress tests. But the Fed was only able to apply its test to a small portion of Deutscheâ€™s American operations. According to a person briefed on the process, that unit will most likely fail the stress tests next week because the Fed has concluded that its processes are deficient.
Apple will host an event on March 9 to give the world the final details on the Apple Watch, which will launch the following month.
We got a good first look at the Apple Watch in September when it was first introduced along with the iPhone 6, but a lot of questions remain.
Here’s what Apple needs to tell us about the Apple Watch on March 9:
So far, Apple has only said you’ll need to charge the Apple Watch every night, which doesn’t make it seem like the company is too confident about the device’s battery life. According to Brian X. Chen of The New York Times, the Apple Watch will have a power-saving mode that only displays the time.
The cheapest Apple Watch, the Sport model, will cost $349. But there are two other models of the Apple Watch: The “regular” Apple Watch made of stainless steel and the Apple Watch Edition made of 18-karat gold. Some have speculated the Edition could cost anywhere between $5,000 and $10,000. The steel Apple Watch could cost a few hundred bucks more than the $349 Sport.
So Apple will have to detail exactly how much the high-end models will cost.
Apple won’t let you use standard watch wristbands on the Apple Watch, but you can easily swap them out with another Apple-made band. The company will need to detail how much the various band styles cost and how it’ll affect the price of the watch when you buy them together.
Apple showed off a few third-party Apple Watch apps in September from companies like United Airlines, BMW, and Starwood hotels, but a lot of developers have been mostly silent about their plans for the device. Apple usually works closely with key developers before a new gadget launch, so expect to see new apps at the March 9 event.
The Apple Watch isn’t your typical Apple product. Customers will need to try it on, test out new bands, and likely ask salespeople a lot of questions. Besides the Apple Store, we don’t know where the company will sell the Apple Watch, although there has been some speculation that it’ll be sold at high-end fashion shops.
Last week, there were some mushy reports that Apple CEO Tim Cook told retail employees in Berlin that he showers with his Apple Watch on. That caused a lot of speculation about how water resistant the device will be. Can you swim with it? Bathe with it? And if so, how long can it remain submerged?
It’s more likely the Apple Watch will only be resistant to a small amount of water. You’ll probably be fine washing your hands, washing the dishes, and sweating, but not much else.
During the September event, Cook told the world that the Apple Watch can do a lot more than what the company showed on stage that day. For example, Cook said the watch could control the Apple TV. Apple will have to go over a bunch of the other features on March 9.
NOW WATCH: Here’s How The Apple Watch Works
Apple will revamp its iAd division by taking a page out of Facebook’s playbook, according to The Information’s Amir Efrati.
Apple executives at this week’s Mobile World Congress in Barcelona, Spain, told Efrati that Apple will soon let third-party companies help advertisers target their ads to specific users, like they can on Facebook. Data like phone numbers and email addresses will be used for targeting, according to the report.
Right now, advertisers pay as much as $10 for an app install ad on iAd, versus a a maximum of $5 for Facebook app installs, The Information says.
Steve Jobs initially had grand visions for iAd, but the platform hasn’t been one of Apple’s smash successes. Apple’s mobile ads were initially too expensive, so advertisers went elsewhere.
More recently Apple has attempted to revitalize its ad business by introducing automated buying and selling.
Even with the renewed focus, iAd may never be an integral part of Apple’s business. Tim Cook’s privacy letter from last September stated that Apple’s goal is to make amazing products, not collect information about its users.
Four months ago, in another failed attempt to boost confidence in the Eurozone and stimulate lending (failed because three months later the ECB finally launched its own QE), the ECB conducted its latest stress test, which as we explicitly pointed out was an utter joke as even its “worst-case” scenario did not simulate a deflationary scenario. Two months later Europe was in outright deflation.
It was initially unclear just how comparably laughable the Fed’s own stress test assumptions were, but refuting rumors that Deutsche and Santander would fail the Fed’s stress test (perhaps because former FDIC head and current Santander head Sheila Bair wasn’t too happy about her bank being one of the failed ones), moments ago the Fed released the results of the 2015 Fed stress test, and…. it seems there was no need to provide a sacrificial lamb as with stocks at record highs. In fact everything is awesome!
As we have previously explained, of course, the results are completely meaningless, as the Fed neither then, nor now, has any methodology for how to calculate capital in case of the same kind of counterparty failure chain as happened during Lehman, and when no amount of capital would have been sufficient to preserve the financial sector. Like we said: theatrical spectacle. But at least everyone’s confidence has been boosted. So Buy stawks, and build your paper wealth!
So to summarize the history of US bank “failure”:
US Financial stocks have been considerably more exuberant ahead of this report than financial credit…
We will see how they react to these results. Some more details from the WSJ:
… all 31 of the biggest U.S. banks had enough capital to continue lending during a hypothetical economic shock where corporate debt markets deteriorate, unemployment hits 10% and housing and stock prices plunge. The exams are designed to ensure large banks can withstand severe losses during times of market turmoil without a taxpayer bailout.
It was the first time since the tests began in 2009 that all banks maintained capital levels above what the Fed views as a minimum allowance. The banks will need to maintain those minimum capital levels to pass the second round of stress tests on Wednesday, which will determine whether a firm can return money to shareholders. Two banks, Goldman Sachs Group Inc. and Zions Bancorp , had certain capital ratios that came close to the Fed’s minimum, which could limit shareholder payouts.
The overall results buttress regulators’ view that the financial system is safer than before the Great Recession, in large part because of loss-absorbing capital built up for the annual stress test exercise. The Fed said the 31 banks’ aggregate Tier 1 common capital ratio, which shows high-quality capital as a percentage of risk-weighted assets, dropped as low as 8.2% under the stressful scenario, well above the 5.5% level measured in early 2009 and the 5% level the Fed considers a minimum allowance.
The bottom line: bank shareholders can recoup some more capital from their “perfectly solvent” banks. As a reminder, it was almost exactly 6 years ago when discussing just what the prerogatives of the Fed were when it proposed enacting a non-QE plan of saving the financial system:
irst, the lack of details will create some uncertainty and concern, particularly because there’s not a great deal said about the “problem children,” the BAC and Citi. Secondly, I think the markets will be disappointed in the following sense: As I will describe, this is a real truth-telling kind of plan. It’s fundamentalist. It’s not about giving the banks a break. It’s not about using accounting principles to give them backdoor capital. It’s very much market-oriented and “tough love.” And I think we all will like that. I like that. But the banks’ shareholders aren’t going to be thrilled about it.
Back then, the bank shareholders made it quite clear that they want QE, and they got QE. They have been thrilled ever since.
* * *
A reminder of what last year’s stress test scenarios looked like… in the baseline stress test scenario, the Dow Jones “plunges” to 11.4K in Q3 2014, and then somehow surges back to all time highs by Q4 2016! Does the Fed understand the word Stress?
And here is this year’s oh so stressful scenarios… wonderfully mean-reverting and no contagion and Dow 20,000…
The Fed’s description of the “Severely Adverse” stress test:
The severely adverse scenario for the United States is characterized by a deep and prolonged recession in which the unemployment rate increases by 4 percentage points from its level in the third quarter of 2014, peaking at 10 percent in the middle of 2016. By the end of 2015, the level of real GDP is approximately 4.5 percent lower than its level in the third quarter of 2014; it begins to recover thereafter. Despite this decline in real activity, higher oil prices cause the annualized rate of change in the Consumer Price Index (CPI) to reach 4.3 percent in the near term, before subsequently falling back.
In response to this economic contraction—and despite the higher near-term path of CPI inflation— short-term interest rates remain near zero through 2017; long-term Treasury yields drop to 1 percent in the fourth quarter of 2014 and then edge up slowly over the remainder of the scenario period. Consistent with these developments, asset prices contract sharply in the scenario. Driven by an assumed decline in U.S. corporate credit quality, spreads on investment-grade corporate bonds jump from about 170 basis points to 500 basis points at their peak.
Equity prices fall approximately 60 percent from the third quarter of 2014 through the fourth quarter of 2015, and equity market volatility increases sharply. House prices decline approximately 25 percent during the scenario period relative to their level in the third quarter of 2014.
The international component of the severely adverse scenario features severe recessions in the euro area, the United Kingdom, and Japan, and below-trend growth in developing Asia. For economies that are heavily dependent on imported oil—including developing Asia, Japan, and the euro area—this economic weakness is exacerbated by the rise in oil prices featured in this scenario. Reflecting flight-to-safety capital flows associated with the scenario’s global recession, the U.S. dollar is assumed to appreciate strongly against the euro and the currencies of developing Asia and to appreciate more modestly against the pound sterling. The dollar is assumed to depreciate modestly against the yen, also reflecting flight-tosafety capital flows.
This year’s severely adverse scenario is similar to the 2014 severely adverse scenario. However, corporate credit quality is assumed to worsen even more than would be expected in a severe recession, resulting in a greater widening in corporate bond spreads, decline in equity prices, and increase in equity market volatility than in the 2014 severely adverse scenario.
The fun part: The Fed’s severely adverse scenario assumes the USD “appreciates strongly against the euro and the currencies of developing Asia” – so like… right now?
As for the just “Adverse” scenario, it involves the Dow Jonies “cratering” back 15,000 and BBB debt yielding an unheard of 6%!
Here is Deustche Bank looking crazy.
Spot the subprime auto lender…
* * *
Full Stress-Test reports below…
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Stocks rose for the first time in three sessions Thursday, amid mixed economic data and news that the European Central Bank will start its quantitative easing soon.
The Nasdaq rose 0.3%, while the Dow Jones industrial average edged up 0.2% and the S&a…
The biggest problem we have with central banks is that they are run by academics with ZERO real world experience. This applies not just at the Fed, but most central banks with the lone exception of Bank of China. The greatest danger this presents is that the money-center banks manipulate the central bankers during states of financial panic and they who are so frightened, they will do whatever the money-center banks tell them
In the USA, there is nobody who would investigate the dark corners of the Federal Reserve being manipulated by the NY bankers who walk on water without ice.
However, the system is more open in Britain where the bankers do not control the courts as they do in New York City.
Consequently, the Bank of England (BoE) is now being investigated by the Serious Fraud Office (SFO) for being “too” friendly with the money-center banks during the crisis of 2008.
Last year, the BoE was cleared of “improper conduct” in the currency market manipulation allegations of the money-center banks. Nevertheless, major corporations are starting to wise-up to TRANSACTIONAL banking. A light is starting to go on that by no means can you go to these clowns for corporate hedging and advice for they will ALWAYS rig the game to make as much profit on the trading scalping clients until they bleed.
So while in the USA the banks can still bribe Congress to repeal Dodd-Frank and open the gates to money falling once again from heaven, that is not the case OUTSIDE the USA. Even the movie the FORECASTER is being shown around the world except the USA because of the elite control of the bankers who tell the Fed what to do and when, the Justice Department, and New York Federal Judges protect them every chance they get. We have NOBODY outside of their control to investigate anything.
Britain’s Serious Fraud Office’s investigators are now probing the central bank for possible fraud related to liquidity auctions between 2007 and 2008. During the financial crisis, the BoE invited banks to borrow money from the central bank, in exchange for collateral. This was conducted through a series of “liquidity auctions” where the funds were intended to prevent the banks collapsing. The banks always warn that there will be a complete collapse of the financial system unless their losses are covered.
The SFO is looking into the bankers’ “conduct” that was connected to these liquidity auctions. This is the criminal investigative agency that is conducting the probe of the BoE. Being investigated for “conduct” issues can be a very wide range from price fixing and handing the government the worse collateral possible (FRAUD) to the leaking of confidential information for personal gain.
* * *
The tide is turning against the banks. We will see more and more corporations turn away from the banks as advisory entities. They just cannot be trusted when they are also the market-makers making commissions/spreads on the trading that are totally undisclosed. The day of the banks is coming to an end. It looks more like the next downturn will drive the spike right through their hearts. Just maybe, we may get back to the way its should be – relationship business, not transactional where they have the incentive to manipulate markets for the quick buck and front-run clients.
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Considering the amount of time we spend staring at screens, it’s amazing how little many of us know about what lies just below their surface.
Designer Jacob O’Neal of Animagraffs.com has created a series of beautiful animations that show just how all these pixels and crystals combine to display the words and pictures we see everyday.
By Jeremy Wagstaff
Thu Mar 5, 2015 4:20pm EST
A customer conducts a mobile money transfer, known as M-Pesa, inside the Safaricom mobile phone care centre in the central business district of Kenya’s capital Nairobi in this July 15, 2013 file photo.
Credit: Reuters/Thomas Mukoya/Files
(Reuters) – Globally, an estimated 2.5 billion people don’t have a bank account, but many own a cellphone, fuelling a race to turn these phones into bank books for the ‘unbanked’ to store cash, manage their accounts, make purchases and send and receive money – part of so-called ‘financial inclusion’.
In a report this week, the GSMA, the association of mobile phone companies, said mobile money “has been growing at a dizzying rate.” The Boston Consulting Group said last month mobile money transfers in sub-Saharan Africa alone could generate fees of up to $1.5 billion by 2019.
However, consultants and others working at banks, government agencies and even the phone companies note that, while many people have mobile money accounts â€“ usually with the phone companies – few are actively used. While money flows through these networks, nearly two thirds of the volume comes from users merely topping up prepaid mobile accounts in transactions averaging less than a dollar.
“If you take out air-time, you have a true view of mobile money, and it’s not a good story, more than a decade on,” says South Africa-based Johan de Lange, who works with banks and phone companies.
And, when people do make remittances, those receiving the money tend to cash it in, taking the money out of the system and limiting the potential for mobile money to become a medium of exchange â€“ a mobile wallet for buying things or to provide banking services over mobile networks.
A GSMA spokesperson said air-time top-ups were decreasing as a proportion of overall transactions, and domestic money transfers via mobile were cheaper or safer than other options, and so were “a key piece of the financial inclusion story.”
Use of mobile money, indeed, is spreading and there are success stories, but these are few relative to the number of projects, and consultants and others question just how successful they are.
In Afghanistan, for example, much has been made of a service to send police salaries direct to their cellphones via a code they present to an agent or bank for cash. This has reduced corruption, where police pay was often halved as it made its way through the bureaucratic chain.
But the service last year reached less than 1 percent of the police force, and cost the Law and Order Trust Fund For Afghanistan more than $10 per transaction – much of which goes to Roshan, the phone company which runs the service with Vodafone. The fund said last year it was exploring cheaper options.
The poster child for telco-driven mobile money services is M-Pesa, set up by Vodafone and run by Kenya’s Safaricom Ltd. Mobile money accounts for more than a fifth of its 145 billion shillings ($1.59 billion) annual revenue.
Daniel Maison, a consultant in Kenya, uses M-Pesa to buy petrol, pay restaurant bills or shop at the supermarket. “It’s a part of our lives. We wonder what we did without it. I don’t need to physically have cash. The beauty is you can even have a savings account on your mobile phone,” he told Reuters.
But some note the M-Pesa service owed much of its take-off to the electoral violence in 2007-08 that displaced many Kenyans and made it hard for others to travel. Sending money by phone was the next best thing. Consultants also say the company’s figures hide the fact that mobile money transactions involve sending notifications via short service message (SMS), a cost the operator effectively subsidizes.
“If everyone had to pay for these messages, I wonder how many (telco) ‘rock stars’ there would be,” said Malcolm Vernon, a London-based mobile money consultant who works in Africa, Asia and Europe.
This is not to say that mobile money has no future in emerging markets.
After six years, Wing in Cambodia made a modest profit last year with fewer than 50,000 active accounts, many of them held by farmers and shopkeepers paying their suppliers remotely.
Anthony Perkins, CEO of Wing, once part of Australia and New Zealand Banking Group, says the secret is to think more like a bank than a phone company, such as nurturing a network of agents who can receive and dispense cash. Some of these ‘human ATMs’ can earn eight times the average national income.
“Running an agent network is really no different than running a branch network,” Perkins said.
He and others say that while phone companies, with their reach and flexibility, are good tools for rolling out networks, they aren’t necessarily the best to move mobile money beyond simple transactions into becoming a nationwide, or international, digital money system.
The telcos’ main priorities, they point out, aren’t so much the social goals of financial inclusion, but to reduce churn â€“ keeping customers from jumping to a rival firm – and to maximise the amount users spend on their network.
“I don’t understand why it’s being left to telcos to bring this financial inclusion to the masses,” said Perkins. “Even in a small country like Cambodia you can make money out of this.”
(Additional reporting by Matthew Mpoke Bigg in Accra; Editing by Ian Geoghegan)
Apple has created a cash machine out of its iPhone business by focusing on profits instead of units sold.
But mobile execs who talked to The Information’s Amir Efrati at the Mobile World Congress (MWC) in Barcelona last week think the Apple Watch will utterly dominate both smartwatch profits and marketshare for the next few years.
One Android smartwatch designer pointed out that Apple is in a particularly good position to hit the ball out of the park with the Apple Watch because it controls both the hardware and the software experience.
The only thing keeping Apple from making the Apple Watch an integral part of its business is because the watch needs a relatively recent-model iPhone to operate. Apple can only sell as many watches as they do iPhones.
But even if Apple Watch sales are artificially limited, the company could still sell millions more than any other smartwatch in existence.
Other execs at MWC pointed out that the Apple Watch’s design — it doesn’t look like a traditional watch — could deter people from buying it.
Apple is working hard to skirt that issue by marketing the Apple Watch as a fashion accessory.
The company recently placed a 12-page spread in Vogue to appeal to customers who might not normally find themselves wanting a smartwatch that can buy things and monitor their health, in addition to telling time.
Stocks moved modestly higher during trading on Thursday, regaining some ground after moving notably lower over the course of the two previous sessions. Buying interest was somewhat subdued, however, limiting the upside for the markets.
The major avera…
Video captured on the streets of Shanghai shows two dangerously overloaded delivery bikes stacked with boxes of paper.
Produced by Jason Gaines. Video courtesy of Associated Press.
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We previously reported that Americans are 9 times more likely to be killed by a police officer than a terrorist.
But it turns out that our numbers were incorrect …
This isn’t surprising, given that:
“Reliable estimates of the number of justifiable homicides committed by police officers in the United States do not exist.” A study of killings by police from 1999 to 2002 in the Central Florida region found that the national databases included (in Florida) only one-fourth of the number of persons killed by police as reported in the local news media.
The Guardian reports today:
An average of 545 people killed by local and state law enforcement officers in the US went uncounted in the country’s most authoritative crime statistics every year for almost a decade, according to a report released on Tuesday.
The first-ever attempt by US record-keepers to estimate the number of uncounted “law enforcement homicides” exposed previous official tallies as capturing less than half of the real picture. The new estimate – an average of 928 people killed by police annually over eight recent years, compared to 383 in published FBI data – amounted to a more glaring admission than ever before of the government’s failure to track how many people police kill.
The revelation called into particular question the FBI practice of publishing annual totals of “justifiable homicides by law enforcement” – tallies that are widely cited in the media and elsewhere as the most accurate official count of police homicides.
As shown here, that means that you’re 55 times more likely to be killed by a police officer than a terrorist.
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Positive earnings news nudged stocks higher, breaking a two-day losing streak.
Richard Werner (economics professor at University of Southampton) is the inventor of quantitative easing (QE).
But Werner is now taking off the gloves …
He said recently:
Indeed, economists also note that QE helps the rich … but hurts the little guy. QE is one of the main causes of inequality (and see this and this). And economists now admit that runaway inequality cripples the economy. So QE indirectly hurts the economy by fueling runaway inequality.
A high-level Federal Reserve official says QE is “the greatest backdoor Wall Street bailout of all time”. And the “Godfather” of Japan’s monetary policy admits that it “is a Ponzi game”.
And – as counter-intuitive as it sounds – QE actually hurts the economy and leads to deflation in the long-run.
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