Today's Top Stories Editor's Corner: Holiday office party season is upon us Also Noted: Spotlight On... Saul Steinberg passes away News From the Fierce Network:
Today's Top News1. The toughest business continuity job in the industry
Business continuity plans have been in the spotlight on Wall Street ever since Sandy blew through town. But if any firms in the U.S. think they have it tough, they should check out what Rabee Securities endures on a daily basis. Bloomberg Markets reports on this mostly interest Iraq-based brokerage, which handles agency trades for foreign firms that want access to the Iraqi Stock Exchange. Not too long ago, as the owner was about to board a plane, he got a call from the office. "The manager was on the line to report that a car bomb had exploded next door at the government anti-corruption agency…Fortunately, the last trading day of the year had been two days earlier, so none of Rabee's 16 employees were in the office. The owner then tapped out an e-mail to Rabee's clients that said in part: 'All client information is safe in multiple locations inside and outside Iraq. Praying for a peaceful New Year,'" BM reported. The owner, Shwan Taha seems resigned to his massive continuity challenges. He told the magazine that, "I've always told people the major risk of running Rabee is, one day it may blow up, not Lehman style but physically. What can you do?" Despite the existential threats, the firm is thriving, as the economy and the market have picked up since bottoming out in 2003. For more: Related articles:
Read more about: Business Continuity, brokerage
2. Analysts applaud Citi, but expect more
Was a round of extreme cost-cutting exactly the tonic for what ails Citigroup? Shareholders applauded as Mr. Market bid the stock up nearly 10 percent, but the reality is that Wall Street will be looking for more action of this ilk soon. CLSA's Mike Mayo said this week that CEO Michael Corbat's move to cut 11,000 jobs (4 percent) was a "tremor" and that an "earthquake" is on the way, "likely ahead of the bank's April 16 annual shareholder meeting," as noted by Forbes. Mayo, who had a rocky relationship with top Citi executives during the reign of Vikram Pandit, upgraded the stock to an "outperform" after Pandit was ousted and said this week's big move represented a "free call option for more aggressive restructuring." Mayo thinks it's now much more attractive than Bank of America. Other analysts also think more aggressive cost-cutting is on the way. Nomura's Glenn Schorr says the expense reductions "clearly indicate there is still room to adapt to the current environment and improve profitability." This will likely be the theme for the stock over the next 12 months or so. And if there really is room for expenses to decline, shareholders may be rewarded. But I've said all along that the main concern long-term is the lack of revenue growth potential. This is something that afflicts all the top banks right now. There doesn't appear to be a clear winner at the commercial banking or investment banking side. At some point, the top-line will come back into the public discussion in a big way. For more: Related articles: Read more about: Citigroup, Stock Analysts 3. Goldman Sachs' CFTC punishment is light, but suggestive
After Goldman Sachs worked so hard to put its enforcement woes behind it, do the "failure to supervise" charges by the CFTC represent a significant setback? Recall that the CFTC voted last week to levy a $1.5 million fine against Goldman Sachs over trading in 2007 by then-trader Matthew Marshall Taylor. He was subsequently accused of entering rogue trades to conceal a $8.3 billion position. The trading ultimately cost Goldman Sachs $119 million in losses. A $1.5 million fine is chump change for the bank, but that's precisely the problem for some CFTC commissioners. One commissioner felt the fine was way too low. "Given the egregious nature of the failure to supervise adequately, combined with the high number of violative transactions, I believe that the monetary penalty should be significantly higher in order to represent a sufficient punishment, as well as to denote a meaningful deterrent to future illegal activity," according to a dissenting opinion from Commissioner Bart Chilton, as noted by the New York Times. He did not think the fine was sufficient as a penalty or a deterrent. Goldman Sachs also agreed to some compliance program changes. The bigger issue here is the extent to which rogue trading is possible at top Wall Street banks. Recently, the London Whale, the Glenn Hadden controversy, and the alleged Apple stock sham trade at Rochdale Securities offers some good reasons to stop and ponder whether rogue trading is not only possible but actively practiced. For more:
Read more about: CFTC, Enforcement Action 4. JPMorgan to resist layoffs in 2012
The trend in the banking industry is toward more downsizing. This was underscored powerfully by Citigroup's announcement that it will lay off 4 percent of the workforce, or 11,000 employees. In September, Bank of America announced that it would slash 16,000 jobs by the end of the year, as Project New BAC entered a new phase. JPMorgan Chase, however, wants the industry to know that there's much less doom-and-gloom within its ranks. The company intends to avoid mass layoffs, according to Bloomberg. JP Morgan Chase is also letting it be known that the bonus pool for the corporate and investment bank will be 2 percent smaller this year. One analyst was quoted saying, "If the JPM bonus pool only shrinks 2 percent this year, then I'd say that those guys, and women, are the luckiest folks on earth. I expected much more shrinkage." Indeed, the bank has weathered some nasty storms this year. JPMorgan generated a record $19 billion in net income in 2011 and is on track to generate nearly $21 billion this year, despite the $6.2 billion in losses attributable to the London whale hedges. All in all, it could have been a lot worse. It should be said that bank executives are keen to lower expectations to avoid any massive surprises when employees are given their numbers. For more: Related articles: Read more about: Layoffs, jobs 5. Diamondback Capital to shut down
Does the demise of Diamondback Capital Management hold any clues as to the future of SAC Capital? Diamondback Capital was of the several hedge funds implicated in the on-going insider trading crack down. They were raided as far back as 2010, and two of its former employees have been charged with insider trading crimes. The firm held on gamely for about as along as it could. But in the end, the limited partners had had enough. They demanded redemptions worth about 25 percent of the firm's assets, which prompted the firm to announce that it will shutter itself. Some might be surprised it held on so well for so long. Level Global Investors and Loch Capital Management, which were also raided about the same time, shut down much earlier. In this era of heightened emphasis on GRC concerns, there's not a lot of room for error by hedge fund managers. SAC Capital, however, is in a league all its own. Few fund firms can get away with charging a 50 percent performance fee. You've really got to perform to charge that much. That said, even SAC's limited partners have their limits. Citigroup's private banking unit has SAC Capital on watch right now. Morgan Staley does as well, according to CNBC. For now, the floodgates at SAC Capital remain closed and there is no massive outflow. This owes in part to a solid performance in 2012, but criminal charges and perhaps even civil charges could change everything. For more: Related articles: Read more about: insider trading Also NotedSPOTLIGHT ON... Saul Steinberg passes away Saul Steinberg in many ways epitomized the old-school corporate raider, which seems like such an anachronism these days. He has passed away at age 73 and will be remembered in part as pioneer in the dark art of greenmail. His Reliance Group served as his vehicle to make unsuccessful bids for Chemical Bank and Walt Disney. The latter battle ended with the target buying back Steinberg's shares at a premium of almost $60 million. Article Company News:
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Monday, December 10, 2012
| 12.10.12 | The toughest business continuity job in the industry
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