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2. Tapering to remain a huge issue

It's no secret that alternative investment companies have become massive landlords.

They have raised about $18 billion to buy more than 100,000 homes nationwide, aiming to either rent them or sell them at big profits.

Part of being a near-instant landlord means grappling with low-income tenants, including those who use Section 8 vouchers to pay their rent. For example, Blackstone inherited at least 200 Section 8 tenants when it bought a portfolio of Atlanta-area houses in April, according to Bloomberg.

As of now, there would appear to be some confusion in terms of company policy on this matter. Bloomberg starts its article with an anecdote about an agent who was told by Blackstone Group, American Homes 4 Rent and Silver Bay Realty Trust that they had nothing for her clients who rely on these vouchers. That said, her persistence paid off a bit when Blackstone's Invitation Homes eventually relented and said it would accept applications from her.

To be sure, not everyone is so skeptical of these vouchers. The likes of Waypoint Homes and Sylvan Road Capital "consider voucher holders a reliable client base because they have a low turnover rate and the government pays most of their rent on a timely basis." Others, however, may be more skeptical given a perceived stigma of renting to people relying on the vouchers and possible red tape.

To be sure, the percentage of people using these vouchers remains small in the overall portfolios of these companies. But it's possible that community activists and local media will make this a big issue. Executives would be wise to spell out some firm guidelines across all markets now.

For more:
- here's the article

Read more about: mortgages, Blackstone
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By Jim Kim

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3. Latest JPMorgan star executive rises

Wall Street got it wrong.

The conventional wisdom held that tapering was fait accompli. It was merely a matter of scale. But the Fed confounded this wisdom by opting to stick with its easing program. And the stock market reacted with an enthusiastic surge. The implications are perhaps even bigger for the bond market, which staged an ever bigger rally.

Is this enough to stave off the Great Rotation that so many have been predicting? That remains to be seen.

Wall Street has been given a timely reminder about just how hard to can be to read the Fed. The best interpretation may be that this latest move merely kicks the issue down the street a bit. We'll be right back in this same situation in the near future, as quantitative easing will remain a front burner issues. The conventional wisdom is that the tapering will start later this year.

The practical import may be that bond issuers still have a window of opportunity to do some financing on favorable terms. It's unclear how open that window will be and for how long. It will not be long before strategists start to focus on tapering again, which may bid rates right back up, ending the relief rally.

For more:
- here's a DealBook overview

Read more about: Quantitative Easing, Tapering
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By Jim Kim

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4. Bank of America $8.5 billion settlement trial proceeds

Mary Erdoes has emerged as a rising star at JPMorgan.

She has shown herself to be an adept manager in an industry that just happens to carry a lot of cachet and import right now: asset management. She oversees $2.2 trillion as CEO JPMorgan Asset Management, the sixth-largest money management operation in the United States, as noted by Bloomberg Markets. Last year, her unit "produced a 24 percent return on equity last year compared with 9.7 percent at BlackRock Inc., the largest U.S. money manager, and 15.4 percent at Fidelity Investments."

One observer calls her one of the most respected name in finance. Asset management has emerged as a rather coveted business line, as more banks seek to smooth the volatility that has traditionally accompanied FICC and investment banking activity. Steady, predictable revenue streams are what more big banks are seeking right now, banks such as Morgan Stanley and UBS.

Erdoes is in good position perhaps to ascend even higher at JPMorgan, which will not necessarily be easy. "Erdoes is a survivor at a bank whose senior management ranks have been thinned in the past four years by a series of shake-ups, including one following last year's $6.2 billion-plus trading loss at the London-based chief investment office, which isn't part of asset management. The scandal cost Ina Drew, the head of the unit, her job and in August resulted in criminal charges against trader Julien Grout and his supervisor, Javier Martin-Artajo, for wire fraud and other crimes."

One would also have to conclude that she would be a top CEO candidate in the wealth management industry. If she wants to run a company, her fastest route may be to accept the top job elsewhere.

For more:
- here's the article

Read more about: JPMorgan Chase
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By Jim Kim

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5. JPMorgan admits guilt in several areas

Bank of America's efforts to win approval of its controversial $8.5 billion settlement with a group of 22 MBS holders has reached a milestone of sorts. A New York State court, which is deciding the validity of the deal, has turned its attention to the analytical work of consulting firm RRMS Advisors. The firm's Brian Lin performed the analytical work that justified the $8.5 billion deal, which amounts to just 8 cents for every dollar in toxic assets. Lin was hired by the trustee BNY Mellon, whom critics of the deals say is hopeless conflicted.

Last week, attorneys for AIG, one of several MBS holders that have contested the settlement, "tried to portray Lin's work as representing little more than a rubber stamp of the figures provided him by BNY Mellon and the 22 investors. BNY and the investors, according to AIG, were conflicted as a result of extensive business ties with Bank of America and so did not push hard enough to extract a larger settlement," as noted by TheStreet.com.

No less than analyst Mike Mayo has apparently had associates in court every day. "Mayo has a 'sell' rating on Bank of America chiefly because of the risks he believes it faces if the settlement is thrown out. Relying on a pair of outside experts, Mayo believes Bank of America could face an additional $16 billion to $22 billion in additional legal damages if the settlement is rejected by Judge Barbara Kapnick. Most other sellside analysts who folllow Bank of America appear less concerned about the case."

This will not wind up anytime soon. But if it emerges that the report was deeply flawed, the bank will have a much harder time winning approval of sweetheart deal, which always struck some as too good to be true.

For more:
- here's the article

Read more about: Bank of America, bond settlement
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By Jim Kim

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