The Haiku of Finance for 11/27/24

Branding for a bank

Solid and steady image

Safe place for money

The Haiku of Finance for 02/27/24

Office building loans

Lenders can't afford re-set

Regional banks bust

The Limerick of Finance for 02/14/16

Hongkong and Shanghai Bank won't move
Headquarters is set in its groove
It's safer to stay
Where there's no bribe to pay
Global bankers have nothing to prove

Financial Sarcasm Roundup for 02/09/16

New Hampshire voters have made up their minds tonight, mostly in favor of outsiders. I have made up my mind in favor of myself, because I can fix all of America's problems with sarcasm.

Silicon Valley startups aren't happy anymore. Unicorn employees are taking off their party hats, realizing that the unicorn they were riding to riches was a donkey in its own party hat all along. Employees who were counting on their stock options to pay for a McMansion are watching those dreams evaporate. Liquidation preferences are the well-connected VCs' way of walking away laughing at everyone who worked hard from the start. BTW, I have never seen the point of the Crunchies awards. A corporation's performance is not like a movie or pop song. The only performance that matters is the bottom line. Net income is the only award that pays bills.

Germany is lining up praise for Deutsche Bank. I recall hearing the same things from Bear Stearns and Lehman Brothers before they fell apart. It's too bad the ECB's bank stress tests weren't really stressful. Examiners could have looked under the hood at Deutsche Bank and figured out what needs fixing. Now investors need to take a look at the entire European banking sector's exposure and figure out who's sitting on powder kegs. Greek sovereign debt is the obvious first place to look, then Chinese sovereign debt, then other emerging market debt, then any rotten bananas stored in these banks' break room refrigerators.

San Francisco property owners are sitting on big bubble values. No one saw this coming, of course, after the dot-com bubble and housing bubble of the last decade. I love the mention of all-cash buyers looking for investment properties. The clueless private equity funds and assorted rich people who bought homes in The City sealed their own fates. I will buy what they abandon at bargain prices.

Voting is awesome. Medieval peasants would rebel against their lords when they didn't like working conditions. Today we have the bloodless option called elections to voice displeasure with Establishment elites. I would seriously consider voting for a candidate who formally adopts sarcasm as a campaign platform.

The Limerick of Finance for 02/07/16

Wells Fargo's big mortgage fraud due
Resolved after folks went to sue
Now they're clear for new scams
Ignore credit exams
Underwriters must still get a clue

Financial Sarcasm Roundup for 01/26/16

The Beatles once sang about having "A Hard Day's Night." That's unintentionally sarcastic. If your hard day continues into the night, you may have a lifestyle problem.

JP Morgan Chase wants to turn your smartphone into an ATM. People need to think hard about this very risky approach. Tapping a smartphone to an ATM means anyone who holds the phone can get your cash. It will be a boon for pickpockets and armed robbers. JP Morgan's IT people need to code some hard-core biometric identification tools into their ATM app before it goes live. I think a saliva sample would work nicely. Just lick your smartphone's screen before you tap for that cash.

Apple's iPhone sales are slipping. Here's the latest evidence that a long-term bet on endless China growth is the corporate strategy of five years ago, not today. The inevitable US sales peak will come when Apple's too-stupid early adopter segment finally realizes that they can do without spending $800 every eighteen months for an incremental improvement in camera resolution. Oh yeah, the Apple Watch looks like the company's first dud since the Newton scratchpad. I knew the Watch was useless as soon as I saw it. Watches cannot be scaled down versions of smartphones due to their display size but nobody at Apple was thinking about biometrics. Tech marketers fall for their own hype at the tops of market bubbles.

Oil producers that cut costs can survive earnings season. The ones who drilled $60/boe wells expecting to make $100/boe forever are toast. I was really getting sick of hearing from unproven junior E+P companies tout their shale wells. They can have their remaining employees take turns sucking the oil out through big straws if they can't afford fracking fluids anymore.

I usually have a great day's night, unlike the Beatles. I studiously avoid the Notre Dame Club of San Francisco because those people used to ruin both my days and nights when I met them. No one can ever ruin me now.

Financial Sarcasm Roundup for 12/07/15

Forbes thinks we should buy stocks before the Federal Reserve raises its interest rate target. Some editors forgot to mention that even a slightly higher cost of capital will force companies with weak balance sheets into serious trouble. I shake my head whenever a media publication that is obviously not a licensed brokerage purports to give financial advice to readers whose personal situations it cannot know. There's more to bank stocks than book value. Buying one without knowing its Texas ratio or capital adequacy ratio is like buying a pig in a poke.

Lower oil prices offer some support to long-term bond prices. I'll believe that correlation holds when someone shows me data for a time series longer than 48 hours. Interest rates still govern the yield curve in every country with a bond market. Any rise in the Fed's target rate means oil loses its hold on bond prices and the long end of the curve comes under downward pressure. It must be a slow news day when bond traders need to swallow an argument for tracking oil prices instead of the risk-free rate of return. I never ignore sovereign credit risk, but that concern escapes bond fund managers who take their eye off the ball and get distracted by oil.

I have noticed lots of mixed reactions lately about the IMF's acceptance of the Chinese yuan as a reserve currency. There's always an echo chamber blathering about how this is some harbinger of China's renewed rise to world dominance. Gimme a break already. When China matches the US's ranks on various data indexes for development and the rule of law, it will be trustworthy as a regional hegemon. I think a lot of the noise about the yuan is driven by portfolio managers who would like their Chinese positions to be more liquid in case they have to sell out quickly. Chinese elites buying vacation homes in California are already selling out.

Once again, there is no financial advice to be found at Alfidi Capital. I don't write this way to help anyone. I amuse myself when nutty market events are on my radar.

Financial Sarcasm Roundup for 11/09/15

More Americans might be tuned in to my sarcasm if they weren't watching Monday Night Football or some cable TV movie. I might get more traffic if I convert my periodic sarcasm blast into a Netflix series.

One asset management firm thinks Chinese debt benefits from China's recession. The tortured logic right there just baffles me. Devaluing the yuan means a yuan-denominated bond's payment stream to Western investors will be worth less, not more. Buying notes issued by Chinese real estate developers means investors are hurt more by further crashes in a very inflated sector. Some money managers just can't let go of a thesis that no longer matches reality. The next bullish bet could be on wax paper rather than yuan paper, because it easily wraps fish from the live fish market. See, this investment thesis stuff is really easy.

China and the Middle East have an insatiable appetite for natural gas. The West is converting to locally available renewable energy while the developing world becomes even more dependent on hydrocarbons from beyond their borders. Addictions typically end badly. Going cold turkey in a couple of decades won't be an option for developing countries facing bad demographics.

Many European bankers are about to be jobless. Think of the fun they can have becoming tour guides for rich Chinese and Russian expatriates. The fired bankers didn't move fast enough to raise capital cushions. Now they can raise money for the Middle Eastern refugees flooding Europe. Grab those tin cups and hit the street corners in Munich and Prague. Bank CEOs can only fake the ECB's stress tests for so long. The money they save on compensation goes into the rainy day crisis buffer.

My sarcasm is way more entertaining than whatever is on television right now. Tune in again next time for another blast from Alfidi Capital.

The Haiku of Finance for 05/21/15

Depositing checks
Best done immediately
Do not let them sit

Financial Sarcasm Roundup for 01/05/15

I launch the first sarcastic blast of 2015 with full enthusiasm.  Morons continue to drag down the human race in the new year.  They remain prominent in financial services and the sector has failed to develop a vaccine.  Here comes my antidote.

A former Morgan Stanley financial adviser grabbed a bunch of confidential client data.  Way to go, Morgan Stanley.  The firm has long been rumored to have some of the weakest internal controls of the major brokerages.  Regressing a couple of tech generations back to punch card data records might be an improvement.  The only thing dumber than trying to openly sell an employer's proprietary data would be to sell it for Bitcoin.

JPMorgan Chase threw in the towel early when investors sued them for currency manipulation.  I expect the other banks to follow JPM.  It gives regulators a signal that settling their other probes into banks' bad behavior is the cool thing to do.  Institutional investors can live with a given amount of wrongdoing as long as they get a payoff.  Bank traders learn that anti-trust manipulation has no real consequence other than a slightly higher cost of doing business.  The whole charade is pretty sick.

Many high-cost oilfields are about to turn off their pumps.  The US rig count is turning into a downward spiral.  The oil shale boom was fun while it lasted.  The rookie wildcatters will take it on the chin because they aren't moving quickly enough to lay off workers and shut down wells.  The drillers who have survived prior bear markets will hunker down as their dumber competitors disintegrate under the weight of high yield bonds they can't pay back.  The biggest winners will be the oil supermajors who can shift production to their lower cost wells.  I expect the majors to buy failed shale projects cheaply in 2015 just to book increases in their proven reserves.

I promised on New Year's Day that Alfidi Capital would continue its sarcastic tone.  I shall not disappoint my readers.  

The Haiku of Finance for 12/22/14

First Russia bailout
Low oil price spreads default risk
Moscow unready

The Haiku of Finance for 10/26/14

Euro banks fail stress
Hard to believe they got well
Some need billions more

The Haiku of Finance for 08/27/14

Bank cyber attacks
Hackers probing defenses
Risk of data breach

Financial Sarcasm Roundup for 08/04/14

There is sarcasm . . . and then there is SARCASM.  There's more of the latter on this blog than the former.

Portugal's central bank pulled Banco Espirito Santo out of the fire by sticking its bad assets in a separate entity.  I don't think they got the memo from US and UK regulators that shareholder cramdowns don't need a good bank / bad bank split as long as the back office processes keep working.  The Portuguese plan is okay if it prevents any further troika bailouts.  Consider this a test case for a rescue that doesn't spook depositors as much as the Cyprus bank crisis.

The Federal Reserve is having serious difficulty finding an exit from its stimulus policy.  The public focus on interest rate targeting is the Fed's deliberate misdirection.  The real source of trouble is the Fed's bloated balance sheet.  Chair Yellen can't unwind those asset-backed holdings without forcing up short-term rates, crashing the demand for bonds, and freaking out non-US central banks.  No one wants to face the nightmare scenario of a Fed bankruptcy, but the current policy's non-exit flirts with such an outcome.

Argentina is in default on its sovereign debt, and ISDA ruled that credit default swap owners can trigger their contracts.  This is a preview of what awaits US Treasury CDS holders given the Fed's problem in my paragraph immediately above.  The smart hedge funds that purchased CDS on Treasuries with record-low credit spreads will make out quite handsomely.  The dumb ones still fixated on interest rate arbitrage are picking up nickels in front of a steamroller, with one shoelace already under the roller.  Hedge funds that bought Argentinian CDS are about to find out if they got luckier than the funds that sued for larger bond settlements.

These news items bring back memories of my days as a financial advisor, reminding me of why I don't perform that function anymore.  I prospected some real idiots who thought they could dictate market returns to me before selecting investment products.  That mentality isn't limited to individual retail investors.  People running big funds and central banks think that way too, as the articles above illustrate.  These people are going to get their big fat rear ends handed to them in the next US market crash.  

The Limerick of Finance for 08/03/14

Portugal's central bank has a plan
Put a bad bank into a tight can
Europe's banks are so bad
Funds that bought them are mad
Their returns will not leave them one fan

Financial Sarcasm Roundup for 07/07/14

I expect the amount of nonsense reaching my inbox to increase as the ancien regime of our global financial system approaches its crack-up point.  The crescendo should be deafening when it hits.

Japan is having second thoughts about jumping on board with the Asia Infrastructure Investment Bank.  China will make a lot of its neighbors reluctant to co-invest in anything it sponsors.  It would be funny if China asked Japan to put up ownership of the Senkakus as collateral for its participation.  The Asia Development already works just fine.  Leave it to China to copy something and pass it off as original work.

China's securities regulators think they can smooth the number of IPOs each month.  These people still have no clue how capitalism works.  Demand for new issues should drive the supply of new shares.  Some regulatory impulse to dress up capital markets is probably a reaction to lack of investor interest outside China.  American investors have been burned by fraudulent Chinese companies making questionable ADR debuts on US exchanges.  Chinese founders thus need a domestic outlet to cash out their stakes before fleeing the country.

The businesses community wants the Ex-Im Bank to stick around.  Forget the rhetoric disparaging it as a fountain of handouts for big corporations.  That is just for the low-information voters in some districts who get riled up about any government program.  If corporate money is behind some government agency, it will continue to operate.  The Ex-Im Bank's outstanding loan portfolio is a small amount of the nation's outstanding credit burden.  It is unlike the mortgage lending for house-flipping and the revolving credit card debt for mindless consumption.  This bank's loans drive export earnings.  It's a winner, for crying out loud.

The White House is backtracking on comments about more bank regulation.  It's so hilarious whenever a politician's handlers bend over backwards to ensure moneyed backers don't take rhetoric seriously.  Here's a lesson in politics for anyone who knows nothing.  Political comments to the general public are just noise to fill space.  Business lobbies should not be so easily fooled, yet the decline in competence I have witnessed among America's elite class in my lifetime indicates that some of them do fall for the common rhetoric.  A few trust fund babies running lousy hedge funds must have made some panicked phone calls to Washington.

The dumb things I've noted above happen all the time.  The dumb people doing these things will be even dumber in a big crisis.  That will be time for me to make some money at their expense by trading against stupidity.  Bring on the panic.  

ECB Negative Rates Paint Europe Into Corner

The world has had an entire day to process the ECB's decision to impose negative interest rates on European banks.  Any bank keeping deposits at the ECB is playing a losing game.  Banks that have no choice must make up their losses with massively cheap lending or arbitrage games in other areas.  I expect some banks to test the waters by charging their retail depositors negative interest on savings accounts, forcing them to spend and invest.  That's how these policy errors play havoc with citizens' lives.

This move has severe philosophical implications.  Negative interest rates magnify the time value of money by turning cash into a wasting asset.  Combined with inflation, which has been a nonzero value for most of Europe's postwar history, negative rates accelerate the debasement of consumers' purchasing power.  Europeans are now forced to immediately spend their earnings or invest them in assets whose risk profiles lie outside what would normally be their portfolio's efficient frontier.  The ECB has just laid waste to modern portfolio theory.

The ECB has stepped into darkness and the world's financial markets are not registering an iota of care.  US equity indexes are at record highs and the CBOE VIX volatility measure is comatose.  Investors worldwide are lounging blissfully unaware of this decision's risks.  Negative rates on bank reserves will force banks to lend cheaply.  If they're borrowing short, they risk exposure to an ECB policy reversal or a surprise drop in the euro's value.  The cheap lending will accelerate monetary velocity, which will massively magnify any rise in Europe's rock-bottom inflation rate.  Europe has painted itself into a corner.  It will make a mess on the way out.

The Haiku of Finance for 05/27/14

Defunct Iceland banks
Creditors must take haircuts
Assets put on "ice"

Iran Takes Lead From West In Executing Banksters

I do not normally congratulate Islamic theocracies for brutality.  Today I shall make an exception.  Iran has executed a billionaire for his role in a massive banking scam.  This bankster defrauded a state-owned bank to buy state-owned assets.  Gee, that sure sounds a lot like some of the chicanery that transpired in the US during the 2008 financial crisis.  Iran sends a clear message about scammers that is lost on American executives.

The difference here in the US is that we don't execute the CEOs who commit bank fraud.  We would rather let them roam free to buy off politicians and donate their ill-gotten gains to museum endowments.  Our legal institutions prefer to turn a blind eye to their frauds out of concern for systemic stability.  Those concerns are overblown, since the FDIC has never had qualms about shutting down unstable banks.  The piles of bad mortgage paper on the Federal Reserve's balance sheet are a weapon of mass destruction.  Better that we had destroyed a few big investment banks instead.

America can learn a good lesson from Iran, a former ally until they went nuts for radical Islam in 1979.  The US should start prosecuting the unrepentant bankster CEOs from 2008 and ship the convicted ones to Iran for ultimate punishment.  Hanging a few billionaire Westerners from lampposts in downtown Tehran would give their executioners some more practice.  It may even provide a basis for an eventual US-Iran rapprochement.  We can show the imams that we can meet them halfway.

Sending American white collar criminals to Iran is of a course a modest proposal, in the tradition of Jonathan Swift.  Coddling them here in the good old USA is an unsatisfactory alternative if they live to steal again another day.

Full disclosure:  I find ethnic Persian women to be phenomenally attractive.  None of them have tried to scam me yet.

Financial Sarcasm Roundup for 05/05/14

I have been quite busy these past few weeks and I have not had much time to generate a whole lot of analysis.  You people will have to busy yourselves with my haiku until things settle down.  Here's some sarcasm to keep you motivated or make you upset.  I truly don't care how any of you feel after reading my genius language.

The National Stock Exchange is preparing to cease operations.  Who are these people anyway?  I've never heard of them and I'm really in step with the markets.  They should have done what IEX Group did to beat the dark pools at their own game but I guess routing slower trades never occurred to them.  Maybe a couple of squirrels could use their system to trade acorns after they turn the lights out.

Norway is transferring its sovereign wealth fund from JPMorgan to Citigroup.  Oh for crying out loud, that is a dumb move.  Switching from the Rockefeller's family bank to a bank that needed massive government bailouts shows how little the Norwegians understand about the American aristocracy.  The Rockefeller institutions have proven remarkably resilient.  JPM is one domino that will stick straight up as others fall thanks to its elite connections.  Just ask Warren Buffett, who has owned JPM in his personal portfolio.

American banks are cutting their exposure to Russian transactions.  I think a lot of bicoastal preppies will run short of imported caviar if Russian exporters can't get credit lines at US banks.  Further sanctions could very well force these banks to sell off what remains of their Russian loan portfolios, in a discounted gift to any European banks able to line up bids.  Our banks have very limited exposure to Russia anyway.

Here's something that America's home-grown conspiracy nuts won't like.  Deutsche Bank is telling its US clients to close their accounts because FATCA's reporting requirements are too onerous.  Our Treasury notes these concerns by saying it won't stringently enforce FATCA through 2015.  That noise is small consolation for non-US banks that don't want to comply with US assertions of sovereignty outside American borders.  The stupid Americans who opened accounts overseas thinking they can escape federal tax scrutiny are about to get their fingers broken hard as foreign doors slam shut.  American citizens will comply with federal tax reporting and they will learn to like it.

There hasn't been a whole lot in the news lately to make me angry.  I have been quite happy lately noting that there are a lot of attractive women walking around my local area wearing shorts, tight skirts, and yoga pants.  I just might invite them over to my place where they can unburden themselves of said clothing, if I can find the time in my schedule.