skip to main |
skip to sidebar
FXCM
Said in Talks With Jefferies for $200 Million Rescue - (www.bloomberg.com)
Jefferies Group is in talks to give FXCM Inc. (FXCM) a
cash infusion of about $200 million, people with knowledge of the matter said,
extending a lifeline to the currency brokerage hobbled by the Swiss central
bank’s decision to let the franc trade freely against the euro. FXCM warned
Thursday that client losses due to the Swiss National Bank’s action threatened
the broker’s compliance with capital rules. The largest U.S. retail foreign-exchange
broker, which handled $1.4 trillion of trades for individuals last quarter,
said it was owed $225 million by clients. This wouldn’t be the first bailout
Jefferies has extended to a financial firm in distress. When Knight Capital
Group Inc. was teetering on the brink of collapse after bombarding markets with
errant trades in August 2012, Jefferies and other firms gave the trading firm a
$400 million cash infusion.
Largest
Retail FX Broker Stock Crashes 90% As Swiss Contagion Spreads - (www.zerohedge.com) UPDATE:
Knight Trading 2.0? Jefferies executive are reportedly on-site at FXCM
discussing a $200 million bailout. As we first reported last night, FXCM was among the
first of many retail FX brokers (and
the largest) to see its clients suffer massive losses from yesterday's Swiss
Franc surge following the SNB decision to unleash market forces. There are now
at least 4 retail FX brokers(FXCM, Excel Markets, OANDA, and Alpari) who
have announced "issues" but FXCM, being among the largest and
publicly traded is the most transparent example of wjust what can go wrong when
average joes are allowed 100:1 leverage. FXCM is now stuck chasing clients for
money they do not (and will never) have.. and its stock is down 90%,
trading a $2 this morning (down from $17 on Wednesday). As Credit Suisse notes,
time is running out as regulators "tend to be impatient once capital
requirements are breached."
Swiss
Bankers Are Accelerating the Euro's Slide - (www.bloomberg.com) The
euro is shaping to be the biggest casualty of Switzerland’s decision to scrap
its currency cap. Soon after the Swiss National Bank unexpectedly ended its
three-year policy of keeping the franc weaker than 1.20 per euro, bearish bets
on Europe’s common currency soared. While setting a record low versus the franc
yesterday, the euro also plunged 3.5 percent against a basket of 10 developed-nation peers, the most since its 1999 debut, and reached an
11-year low against the dollar today. The SNB’s decision removes a key pillar
of support for the euro, boosting the odds that its recent slide will
accelerate. Companies from Goldman Sachs Group Inc. to Pacific Investment
Management Co., the world’s biggest manager of active bond funds, have in
recent days talked about the euro falling to parity with the dollar, a 14
percent decline from its current level. The difference in the cost of options
to sell the euro against the dollar, over those allowing for purchases, jumped
by the most in almost two years yesterday, and extended its advance today to
the highest since August 2012.The euro dropped 1.3 percent yesterday and
tumbled further today, reaching $1.1522, the weakest level since November 2003.
It was at $1.1527 as of 10:16 a.m. in New York.
Davos
Disaster: From Grand Hotel to Big Bust in Six Months - (www.bloomberg.com) The
Golden Egg, Davos’s newest luxurious hotel, was the place to be for the global
elite at last year’s World Economic Forum, selling out all of its 216 rooms. On
one evening, Israeli Prime Minister Benjamin Netanyahu and his wife dined at its restaurant, while
Tony Blair was having a grappa in the bar with a
colleague, according to General Manager Peter Pedersen. Six months later, the
five-star hotel’s management company went bust and its owner, a Credit Suisse Group AG fund, had to start picking up the pieces.
Despite its famous guests, which also included Goldie Hawn and Bono, and extensive research into the local market,
InterContinental Davos was faced with empty rooms once the annual forum’s
delegates went home.
An
82% Chance Of Collapse For Venezuela - (www.businessinsider.com)
Collapsing oil prices have a turned a difficult economic situation into a dire
one. Oil exports brought in 60% of the country's revenue. And now, according
the UBS, Venezuela has an 82% chance of collapsing within a year. The country
will no longer be able to make payments to foreign investors without oil
revenue as it was. Economist Rafael del Fuente wrote in a recent note: By the
government's own recognition, the economy contracted by 4% in the first
three quarters of 2014;
inflation is running at close to 65%; the fiscal deficit has shot up above 15%
of GDP by most estimates; and the black market exchange rate is trading at
VEF180 to the dollar, almost 30 times higher than the official Cencoex
rate. Wall Street is watching and waiting, which is why the spread on
Venezuela's 5 year credit default swap — basically debt insurance — has spiked.
You just don't see charts like this everyday people.
Why
the currency wars are likely to hit the stock market – (www.marketwatch.com) I often write about how we’re living in a time
of escalating currency wars. The Swiss National Bank just used
their counterweight trebuchet to launch a projectile into the
currency markets as they announced that they will no longer peg their Swiss
franc to the euro at a set rate. It isn’t often you see a chart of the U.S.
dollar versus any other currency down 13% in an hour. Such is the case today
with the U.S. dollar versus the the Swiss franc. This kind of sudden
dislocation in major global currency exchanges present a major challenge to the
status quo. It creates confusion and stock markets don’t like confusion.
Remember that it isn’t the direction of currency moves that matter as much as
the speed and magnitude in which changes in those moves happen. And today,
these intraday currency charts look more like weekly charts than the
1-hour charts they actually are. Net net, these currency dislocations are
probably not bullish for stocks near-term, though it is bullish for gold near-term and long-term.
Hedge
Funds Got Whacked By The Swiss Franc Rally - (www.businessinsider.com) The
damage from the Swiss franc's sharp moves comes as a blow for macro hedge fund
managers nursing wounds from nearly four years of mediocre performance. "You
have these massive policies which forced all investors to invest with the
policy and then they remove the policy and everyone is left high and dry,"
said Chris Morrison, strategist for the $550 million Omni Macro Fund. Data
from the Commodity Futures Trading Commission released on Friday
showed net short positions of 24,171 contracts on the Swiss franc, the largest
since June 2013. Adding in 662 short option contracts gives a combined position
of 24,833 contracts or $3.5 billion at the current rate of around 0.90 franc to
the dollar. Global macro hedge funds that use fundamental analysis to bet on
the financial markets and representing $288 billion in assets on the Lyxor
platform had net short position of 2.6 percent, indicating a loss for them
given the currency move.
Md.
couple investigated for letting children, 6 and 10, walk neighborhood alone - (www.washingtontimes.com) Rafi, 10, and his sister, Dvora, 6, are typically
allowed to walk to the two local playgrounds near their house, to a nearby
7-Eleven for snacks or to a public library about three-quarters of a mile away,
the parents said. “They have proven they are responsible,” Mrs. Meitiv told The Washington Post. “They’ve developed
these skills.” But on Dec. 20, when Rafi and Dvora were walking home from Woodside
Park, police officers approached them after receiving a call from someone
reporting unattended children in the area. The children normally carry a
laminated card with parent contact information that says: “I am not lost. I am
a free-range kid,” the mother said, but they didn’t have it on them that day,
The Post reported. The children were loaded into a police car and driven home.
Their father said that when police arrived they demanded to see his
identification and warned him of the potential danger he was putting his
children in, The Post reported. Montgomery County Child Protective Services
reportedly showed up at the home hours later to investigate further. “They came
and they interviewed kids at school without our permission or knowledge. And
when they were talking to them, they were painting a picture of a world that is
very scary,” Mr. Meitiv told
the CBS affiliate.
Child Protective Services could not address this specific case but did point to
Maryland law, which defines child neglect as failure to provide proper care and
supervision of a child, the station reported.
Ukraine President Signs Mobilization Decree: 50,000 To Be Drafted- (www.zerohedge.com) And
with a stroke of his pen, Ukraine's President Petro Poroshenko signs a decree that mobilizes up to 50,000
"health men and women" aged 25 to 60 to the frontlines in Eastern
Ukraine... As UA Today reports, 50 000 servicemen will be drafted to the
frontline in eastern Ukraine. Ukrainian President Petro Poroshenko has issued a
decree mobilising 50,000 servicemen to the frontline in eastern Ukraine. Those
eligible will receive notice papers calling them to service as soon as the
Ukrainian parliament approves the measure. The Ministry of Defense plans to draft
healthy men and women, preferably with military experience. Tank operators,
artillerymen, reconnaissance scouts and messengers aged 25 to 60 are in high
demand. Volodymyr Talalay, Major General: "We are not planning to
draft untrained men for positions that require military efficiency. Military
leaders are looking for those who have already been in the army or those who
can serve within civilian professions." Combat trainings for servicemen
will take 10-15 days. Ministry of Defense officials say this timeframe is
adequate to acquire combat skills and replace those soldiers who will be
rotated out.
Schlumberger
to cut 9,000 jobs on oil-price plunge - (www.cnbc.com) Schlumberger
Ltd, the world's No.1 oilfield services provider, said it will cut 9,000 jobs,
or about 7 percent of its workforce, as it focuses on controlling costs in
response to a continuing fall in oil prices. The company took an already
announced $1 billion charge in the fourth quarter related to the job cuts and
trimming of its seismic business. Schlumberger's customers—oil producers—have slashed capital
budgets and reduced the number of rigs amid a nearly 60 percent slump in oil
prices over the past six months. Analysts at Barclays said last week oil
companies could cut spending on exploration and production in North America by
30 percent or more this year if U.S. crude oil prices hovered around the
$50-$60 per barrel range. "In this uncertain environment, we continue to
focus on what we can control. We have already taken a number of actions to
restructure and resize our organization that has led us to record a number of
charges in the fourth quarter..." Chief Executive Paal Kibsgaard said.
North
Dakota rigs at 5-year low: Governor - (www.cnbc.com) Oil's
recent plunge has sent shockwaves around the world, especially affecting
oil-producing states. Jack Dalrymple, governor of North Dakota, told CNBC's
"Power Lunch"
on Thursday that oil production has been dramatically affected by oil's price
plummet. "About three months ago, the number of rigs in North Dakota was
195, today the number of rigs is 158," Dalrymple said. "That's the
lowest number of rigs since 2010." Dalrymple added that the drop in oil
could affect economic activity in the state. "It creates concern in the
level of economic activity in our state," he said. "Of course, that
impacts sales-tax revenues and income taxes eventually." The WTI and Brent crude prices have been slashed by about
50 percent each in the past three months, with both reaching six-year lows. While
the fall of oil prices could affect the state's employment numbers in the long
term, employment has not been dramatically hurt in the short term. "We had
such a backlog of job openings in North Dakota that, so far, employers are
having a better chance at filling those jobs," Dalrymple said. "I
don't think that's going to change in the short term."
2
FX Brokers Suffer "Significant Losses" After SNB Surprise, "In
Breach Of Regulatory Capital Requirements" – (www.zerohedge.com) In
a re-run of the catastrophic trading losses that occurred around the Russian
Ruble collapse last month (as we described here and here in great detail), two FX brokers (US-based FXCM and New
Zealand-based Excel Markets) announced tonight that they “can no longer meet
regulatory minimum capitalization requirements," due to "significant
losses" suffered by clients. For FXCM these losses mean a $225
million negative equity balance and they are actively discussing
alternatives with regulators. For Excel Markets, it is over... "we will
not be able to resume business...Client positions will be closed within the
next hour." FXCM an online provider of forex trading and related services
worldwide, announced today due to unprecedented volatility in EUR/CHF pair
after the Swiss National Bank announcement this morning, clients experienced
significant losses, generated negative equity balances owed to FXCM of
approximately $225 million. As a result of these debit balances, the company
may be in breach of some regulatory capital requirements. We are actively
discussing alternatives to return our capital to levels prior to today's events
and discussing the matter with our regulators. The broker's stock has
collapsed...
The
Greek Bank Runs Have Begun: Two Greek Banks Request Emergency Liquidity
Assistance - (www.zerohedge.com) The first time the phrase Emergency Liquidity
Assistance, or ELA, was used in the context of Greece was in August 2011, when Greece was imploding, when its banking
sector was on (and past) the verge of collapse, and just before the ECB had to
unleash a global coordinated bailout with other central banks including global
central bank liquidity swap and unleash the LTRO to preserve the Eurozone. As a
reminder, this is what happened back then: "In a move described as the "last
stand for Greek banks", the embattled country's central bank activated
Emergency Liquidity Assistance (ELA) for the first time on Wednesday
night." "Although it was done discreetly, news that Athens had opened
the fund filtered out and was one of the factors that rattled markets across
Europe. At one point Germany's Dax was down 4pc before it recovered. The ELA
was designed under European rules to allow national central banks to provide
liquidity for their own lenders when they run out of collateral of a quality
that can be used to trade with the ECB. It is an obscure tool that is supposed
to be temporary and one of the last resorts for indebted banks." Raoul
Ruparel of Open Europe told The Telegraph: "The activation of the
so-called ELA looks to be the last stand for Greek banks and suggests they are
running alarmingly short of quality collateral usually used to obtain
funding." He added: "This kicks off another huge round of nearly
worthless assets being shifted from the books of private banks onto books
backed by taxpayers. Combined with the purchases of Spanish and Italian bonds,
the already questionable balance sheet of the euro system is looking
increasingly risky." As a further reminder, this is how cryptically little the ECB has to say about its "last-ditch"
liquidity bailout program:
Casualties
From Swiss Shock Spread From New York to New Zealand - (www.bloomberg.com) Losses
mounted from the Swiss currency shock as the largest U.S. retail
foreign-exchange brokerage said client debts threatened its compliance with
capital rules and a New Zealand-based dealer went out of business. FXCM Inc.,
which handled a record $1.4 trillion of trades by individuals last quarter,
said clients owe $225 million on their accounts after theSwiss
National Bank’s
decision to abandon the franc’s cap against the euro roiled global markets.
Global Brokers NZ Ltd. said the impact on its business is forcing it to shut
down. “I would be astonished if we did not see more casualties,” Nick Parsons,
the London-based head of research for the U.K. and Europe at National Australia Bank Ltd., said by
phone from Sydney. “This was a 180-degree about turn by the SNB. People feel
hurt and betrayed.” Dealers in London at banks including Deutsche Bank AG, UBS
Group AG and Goldman Sachs Group Inc. battled to process orders yesterday when
the SNB surprised markets with its announcement on Thursday morning in Zurich.
The franc surged as much as 41 percent versus the euro, the biggest gain on
record, and climbed more than 15 percent against all of the more than 150
currencies tracked by Bloomberg.
Suncor
Cuts Capex By $1 Billion, Fires 1000, Implements Hiring Freeze - (www.zerohedge.com) Suncor
Energy Inc. announced today significant spending reductions to its 2015 budget
in response to the current lower crude price environment. The cuts include
a $1 billion decrease in the company's capital spending program, as well as
sustainable operating expense reductions of $600 million to $800 million to be
phased in over two years offsetting inflation and growth. "Our integrated
model and strong balance sheet have positioned us well for the price
downturn," said Steve Williams, president and chief executive officer.
"Cost management has been an ongoing focus, with successful efforts to
reduce both capital and operating costs well underway before the decline in oil
prices. However, in today's low crude price environment, it's essential we
accelerate this work. Today's spending reductions are consistent with our
commitment to spend within our means and maintain a strong balance sheet. We
will monitor the pricing environment and take further action as required."
Suncor is implementing a number of initiatives to achieve the cost reduction
targets. These include deferral of some capital projects that have not yet been
sanctioned, such as MacKay River 2 and the White Rose Extension, as well as
reductions to discretionary spending. Budgets affecting the company's safety,
reliability and environmental performance have been specifically excluded from
the cost reduction program. Suncor has also implemented a series of workforce
initiatives that will reduce total workforce numbers in 2015 by approximately
1000 people, primarily through its contract workforce, in addition to reducing
employee positions. There will also be an overall hiring freeze for roles that
are not critical to operations and safety.
Copper
Tumbles Most in Six Years Amid Commodity Collapse - (www.bloomberg.com) Copper
tumbled the most in almost six years as it followed other metals lower amid a
collapse in commodities. Lower energy costs and demand weakness amid
worse-than-expected economic data in China are driving prices down, according
to Goldman Sachs Group Inc. Consumption in the world’s biggest user will grow
at the slowest pace since at least 2009, Deutsche Bank AG estimates. Prices
slumped as much as 8.6 percent in London today and fell by the daily limit in
Shanghai. Commodities have sunk to the lowest level in more than 12 years, led
by a rout in energy prices, after a decade-long bull market led producers to
boost output and a stronger dollar diminished their allure to investors. Oil’s
60 percent decline since last year’s peak is cutting costs for mining companies
and bolstering speculation the glut will worsen. Copper is the worst performing
non-energy raw material this year on the Bloomberg Commodity Index, which fell to the lowest since August 2002.
Oil
Collapse of 1986 Shows Rebound Could Be Years Away - (www.bloomberg.com) The
last time excess supply caused a plunge in oil, it took almost five years for
prices to recover. The CHART OF THE DAY shows how West Texas Intermediate, the
U.S. oil benchmark, tumbled 69 percent from $31.82 a barrel in November 1985 to
$9.75 in April 1986 when Saudi Arabia, tiring of cutting output to support
prices, flooded the market. Prices didn’t claw back the losses until 1990. Oil
has dropped 57 percent since June and OPEC members say they’re willing to let
prices sink further. Surging prices in the 1970s led to the development of the
North Sea and Alaska oil fields. OPEC members also increased capacity, leaving
the Saudis to trim output when demand softened.
Treasury
Bond Yield Drops to Record Low Amid Fear of Global Deflation - (www.bloomberg.com) Treasury 30-year bonds yields are tumbling to
record lows as the collapse in oil and commodity prices smothers inflation and
hampers global economic growth. Global sovereign yields fell to records in the
U.K., France,Canada and Japan as a report showed retail sales in
the U.S. slumped in December by the most in almost a year, reflecting a
broad-based retreat that may prompt economists to cut growth forecasts. The
slide prompted traders to push back expectations for the timing of the first
Federal Reserve interest-rate increase into December less than a month after
speculating that rates could rise as soon as April. “The Fed’s between a rock
and a couple of hard places.” said Daniel Fuss, Boston-based vice chairman at
Loomis Sayles & Co., who helps manage the $24.5 billion Loomis Sayles Bond
Fund and has been in the securities business since 1950. “The savings flows go
toward safety and return, and the U.S. Treasury market has both.” Even at the
record low yield of 2.39 percent reached today, 30-year Treasuries are
attractive to global investors looking at negative returns on the sovereign
debt of nations including German with the European Central Bank expected to add to its bond-buying
program as policy makers seek to avert deflation.
Freeport
Leads Plunge in Mining Stocks After Copper Slump - (www.bloomberg.com) Freeport-McMoRan Inc. (FCX), the largest publicly traded copper producer,
and other suppliers of the metal plunged after the metal fell the most in six
years. Freeport declined 9.5 percent to $19:05 at 9:51 a.m. in New York and
traded at the lowest since April 2009. Glencore Plc (GLEN), the third-biggest producer, dropped 12
percent in London and First Quantum Minerals Ltd. slid 27 percent in Toronto. The
world’s largest mining companies have already been hurt by a slide in
commodities, with steep drops in iron ore, coal and oil as a supply glut
collides with sluggish demand. Copper on the London Metal Exchange
tumbled as much as 8.7 percent today, undermined by worse-than-expected
economic data in China,
according to Goldman Sachs Group Inc. Consumption in the country, the biggest
user of the metal, will grow at the slowest pace since at least 2010, Deutsche
Bank AG estimates.
