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2. Bank of America to dissolve Merrill unit but keep brand alive

JPMorgan's long list of regulatory woes got even longer when it revealed via a filing that it was under investigation for possible bribery in China. Foreign Corrupt Practices Act actions are certainly plentiful these days, and the Justice Department might be convinced that China represents a fruitful new area for prosecutions, especially in banking.

Banks and other top companies have traditionally hired the sons and daughters of powerful government officials, so-called "princelings." Hiring such people is not and of itself illegal. But if the hiring is in exchange for lucrative business contracts, the issues get tricky.

According to media reports, the JPMorgan probe revolves around the hiring of Tang Xiaoning, son of a former Chinese banking regulator, and Zhang Xixi, the daughter of a Chinese railway official.

"The investigation is likely to cause consternation on Wall Street and in the corridors of power in China, where hiring the sons and daughters of prominent politicians or business leaders is considered de rigueur as part of a system that places heavy emphasis on "guanxi," or personal connections, as a way of securing new business," notes the Financial Times.

What's interesting is that top banks have found the hiring of princelings more difficult in recent years. More of these privileged citizens have shunned traditional investment banks for work in private equity companies, which offer greater rewards.

More banks may find themselves under a microscope as well. Goldman Sachs for example hired Jiang Zhicheng, grandson of the former Chinese president Jiang Zemin, with no regulatory fallout apparently. The key for them will be to demonstrate somehow that the hiring of specific employees was not a condition for winning contracts. That may be difficult.

For more:
- here's the article

Read more about: banks, Fcpa
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By Jim Kim

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3. Icahn looking at big defeat in Dell battle

Bank of America is about to embark on an interesting experiment. Can it keep one of the most storied brands in the financial services industry alive, even though there is no corporate entity solely behind the brand? Will the once-proud brand still carry the same cachet?

Bank of America has announced that it will do away with Merrill Lynch & Co. as early as the fourth quarter. The bank will assume all legal and financial obligations. But Bank of America intends to keep the Merrill brand alive. The broker-dealer unit "currently does business as Merrill Lynch Wealth Management. After the change takes place, it will continue to be a business division within Bank of America," notes Financial Planning.

"There's no change in the operations of our businesses, the brand structure or how we face and interact with clients," a spokewoman was quoted. "Merrill Lynch and the bull are still there."

This move is hardly surprising. The bank faces punishing expense pressures, and it just makes sense to consolidate where it can. For the Thundering Herd, however, it's unclear how this will be perceived. Every broker no doubt will have his or her opinion.

They will have to reassure customers that this is a mere cosmetic change. But in the minds of some, this move may underscore that the Bank of America culture has won out. No doubt the bank recognizes that it has a huge internal as well as external communications challenge on its hands.

For more:
- here's the article

Read more about: Bank of America, Merrill Lynch
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By Jim Kim

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4. The Hindenburg Omen draws attention

Is it over for Carl Icahn in the Dell buyout sweepstakes?

Last week's court decision ostensibly dealt his efforts a massive body blow. Judge Leo Strine's decision amounts to a very high-profile endorsement of the Dell's board special committee and their approach to the auction of the computer company. The committee did very little wrong in his view. The judge had a very simple solution for Icahn. If he wants to scuttle the deal that the committee has approved, he simply needs to come up with a higher bid.

At this point, you get the idea that such a bid---a sweetened leveraged re-cap---will be hard to put together. But one could argue that Icahn has overall had a salutary effect on the bidding process. Michael Dell and Silver Lake were forced to sweeten their offer, as a direct result of Icahn's agitation. On August 2, they delivered their final offer, a special dividend of 13 cents a share on top of a 10-cent increase in the sale price to $13.75 per share. That's a much better deal than the pre-Icahn offer.

It's not clear what the cost bases were for Icahn, but no would be surprised if walked away with a capital gain, which is what he's all about.

What remains to be seen is whether he will proceed aggressively with his efforts to scuttle the deal, without coming up with another offer. It seems like a longshot. He may stick to his proxy battle at the October annual meeting, issuing lots of rhetoric about how Michael Dell and the board let shareholders down. But at that point, if all goes as expected, shareholders will have already approved the deal. It might seem like wasted energy and bitterness.

For more:
- here's a Reuters article

Read more about: Icahn, Dell
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By Jim Kim

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5. Is Libor legal fallout just beginning?

Of all the technical indicators out there, the Hindenburg Omen is perhaps the most wonderfully named. It just sounds portentous. The Financial Times notes a few others, the Death Cross and the Bearish Abandoned Baby. They certainly raise brows.

Unfortunately, for adherents of technical analysis, the Omen is living up to its name these days. The indicator flashes warnings when high numbers of stocks hit highs and lows on any given day. Recently, amid some record setting runs, it has been portending a lot of turbulence ahead.

The Omen has cropped up 11 times in the past 50 days, according to Jason Goepfert at Sundial Capital Research. He "estimates that the S&P 500 has lost an average 3.5 per cent in the three months following at least 11 appearances of the Hindenburg Omen.

The recent sightings coincide with record highs on the S&P 500, but with the looming prospect of the Federal Reserve tapering its monetary stimulus that has lifted riskier assets like stocks. That has fed a sense of bearishness among some investors, who say it may be time to take the Omen seriously."

So should we take all this to heart and run for the hills? "While the Hindenburg Omen has gained a cult following among certain stock traders, it has also been heavily criticised by others for being little more than a well-named headline-grabber of little value to investors."

It should be said that traditional technical analysis in general has lost a lot of cachet over the years. Many see it as a tired, old uncle to a more modern trend: quantitative analysis. But take it for what it's worth. To be sure, just because you find this Omen a lot of baloney, there are lots of other reasons to be worried about the market at these valuations.

For more:
- here's the article
- here's a CNBC article

Read more about: Hindenburg Omen, technical analysis
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By Jim Kim

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