Market events mean no time for rest? |
If
history repeats itself or if tradition rules, then the waning days of
summer in finance and markets should be marked by doldrums, inactive markets and dreading Labor Day.
But
once again August has thrown a soft curve ball--with market volatility,
big institutions confronting legal issues, and a band of activist
shareholders causing havoc in boardrooms. Nothing that has caused
market nightmare, but enough to cause a little upheaval in what should
be dull days before mid-September. The Augusts of 2011-12, recall, were
upended by disgusting debates in U.S. Congress about government deficits
and debt.
The
tale of the "Whale" and the $6 billion in trading losses at JPMorgan from 2012, events we thought had faded from everybody's attention, plopped up again when government regulators and
law-enforcement officials decided to place criminal charges against some banks officials for hiding information about the losses and acting in
deceitful ways. The irony is the "Whale" himself, the JPMorgan trader
in London who presided over the disastrous trading positions, is not a target. JPMorgan likely suspected some action
of this kind would occur, but it didn't expect the whole
matter would resurface in late-summer business headlines, forcing the
bank once again to rehash, review and remember the whole dreadful
episode.
William
Ackman, the tenacious shareholder activist whose bold charges
and boardroom moves attract constant media attention, raised his surrender
flag this month with J.C. Penney. Ackman and his Pershing Square Capital fund were
instrumental in implanting Apple-groomed CEO Ron Johnson, who was
supposed refashion JCP into the retail-industry version of Apple-like
merchandising. The Ackman-backed experiment failed miserably, the JCP
CEO resigned, and Ackman became a pariah in that boardroom. He gave up
in August, resigned from (or was shoved off) the board, and resumed his
shareholder fights elsewhere--at Herbalife.
Ackman has charged that company (Herbalife) in running a Ponzi
scheme in selling its product, and various sides have taken up the debate: Is Herbalife a legitimate company, a reasonable growth investment? Or is it administering a fraudulent marketing scheme? The skirmish continues.
Commodity
activities have plagued big banks Goldman Sachs and JPMorgan this
summer, and unexplained volatility is not the reason. Business
reporters (first at the New York Times) discovered questionable practices by Goldman in aluminum
markets, where Goldman receives fees for warehousing aluminum before final
sales to end-users. Goldman is alleged to conduct a practice of
delaying the transport of aluminum by transferring it from warehouse
bin to bin for no apparent reason except to prolong fee collection.
The wreckage of mortgages and assembling mortgage securities won't go away for many top banks. This summer, Bank of America, still being knocked over for acquiring Countrywide in the midst of the crisis, is wrestling with legal accusations and possible settlements--in the tens and hundreds of millions.
Elsewhere,
regulators accused JPMorgan for deceptive pricing behavior in West
Coast electricity markets. Energy regulators accused the bank of unfair
mark-ups in electricity prices in related trading activity. JPMorgan
and regulators agreed to a settlement, but the entire episode was enough
to spur the bank to move quickly, reorganize and rethink its commodities-trading
business. It opted to withdraw from physical-commodities businesses--businesses
it had inherited from Bear Stearns.
After a remarkable first-seven months run, equity
markets have begun to rumble and shudder, mostly because market-moving investors prefer to pay much attention to hidden messages coming from the Federal Reserve.
Every hint that the Fed plans to stop purchasing bonds that will keep
interest rates low leads to gyrations in stock markets. That's the way
the markets move these days.
And while it was transforming itself into a model citizen for regulators, JPMorgan was pummeled once again when the SEC announced it was investigating the bank for nepotism, hiring sons and daughters of well-connected Chinese executives and government officials. No doubt senior bankers in CEO Jamie Dimon's circle are puzzled about a finance-industry practice that has taken place since, well, stock-market traders consummated transactions around a tree in downtown, 19th-century Manhattan.
And while it was transforming itself into a model citizen for regulators, JPMorgan was pummeled once again when the SEC announced it was investigating the bank for nepotism, hiring sons and daughters of well-connected Chinese executives and government officials. No doubt senior bankers in CEO Jamie Dimon's circle are puzzled about a finance-industry practice that has taken place since, well, stock-market traders consummated transactions around a tree in downtown, 19th-century Manhattan.
Perhaps
these days, it's all the new normal--abetted by the Internet, technology,
immediate access to market updates and everybody's ability to
reach out to anybody anytime. There might have been a time when all
bankers, traders, compliance officers, deal-doers, and research
analysts escaped en masse in August. But nowadays regulators and
enforcement officials don't take a break. High-frequency traders and
hedge-fund managers don't let up in summer. Shareholder activists
don't ease the pressure, and board rooms, CFOs, and investment-managers
don't have the luxury of summertime doldrums anymore.
Tracy Williams
See also:
CFN: Delicate work-life balance, 2010
CFN: Market volatility: Can you stand it? 2011
See also:
CFN: Delicate work-life balance, 2010
CFN: Market volatility: Can you stand it? 2011
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