Levine on Wall Street: Elegant speedy cheetahs and telling typos
By Bloomberg
Sheelah Kolhatkar interviewed Bart Chilton to see if he feels weird about leaving the Commodity Futures Trading Commission to become an adviser/lobbyist for the high-frequency trading firms that he famously described as "cheetahs," and not in an obviously good way. The answer seems to be "no, with undertones of yes," but never mind that, it's Bart Chilton, who at the CFTC "demonstrated an intuitive sense for personal branding, sporting cowboy boots, flashy suits, and shirts with monogrammed cuffs." So this passage, for instance, isn't about Chilton's conflicted feelings about HFT; it's about the lava lamp:
About that cheetahs comment: "People look at it as negative, and certainly I meant it as such in most cases," he says, sliding the lava lamp to one side, out of his field of vision. "But there are complimentary things tied with cheetahs. They're elegant, they're superspeedy, they're skilled at what they do."
Elsewhere, the Securities and Exchange Commission "plans to bring more enforcement cases against dark pools and private trading venues whose opaque rules and incentives may harm investors." And here is a profile of Hudson River Trading, a high-frequency trading firm that wants to assure you it's not evil.
BlackRock is not Pimco.
BlackRock announced earnings yesterday, beating estimates and attracted $28.7 billion in new money, some of it probably due to the situation at Pimco. Here is Larry Fink alluding carefully to that situation:
The firm's "relentless focus on culture, the one BlackRock, a team approach is being highlighted quite a bit, but we have never changed our business model," Fink said in the telephone interview. "Our business model, especially in light of the complexities of products, the complexities of investing in the world, requires much more of a team enterprise."
More than what? Are suggesting that there's a particular big bond investing firm with an unpleasant culture, reliance on a single outsized personality, and recent dramatic changes? In other BlackRock-is-not-X news, Blackstone announced earnings today; here are the release and presentation, and the supplement.
Be sure to proofread the faked documents that you submit to regulators.
Here is a Securites and Exchange Commission action against a former Wells Fargo "compliance consultant" who in 2010 was tasked with looking into some trading by a Wells Fargo adviser and his customers ahead of a merger announcement. She decided that it was not insider trading. The SEC later determined that it was. In 2012, it demanded records from Wells Fargo, including the results of her review. She (allegedly) looked back at her review, saw that it was a little skimpy, and added a few lines about how rumors of the merger had been circulating for weeks before the announcement, making the trading look less suspicious and her own review more thorough. But in the stuff she added, she made a key mistake: She wrote "9/1/12" meaning "Sept. 1, 2010." Because she wrote it in 2012. But she supposedly wrote it in 2010. The SEC noticed the typo and everything came crashing down. One lesson here is, proofread. Another lesson is, what on earth did she get out of (allegedly) covering up for these people? Why was this worth it? It's not like she insider traded. She just didn't want her compliance review to look sloppy and embarrass her in front of the SEC. Weird.
How do you keep hedge funds from running on banks?
We talked the other day about the new swaps rules designed to prevent big banks from terminating derivatives with other big banks as soon as those banks become insolvent. But those rules apply only to bank-on-bank contracts; hedge funds and asset managers can still run as quickly as they like. Regulators are aware of the problem and have a fix:
To address this, the Fed, with the support of the Federal Deposit Insurance Corp., intends to issue rules in the months ahead that would prohibit bank-holding companies from entering into contracts with trading partners that don't include the 48-hour stay and other provisions included in the new swaps documents, according to people familiar with the regulators' plans.
Existing contracts would still be runnable, but new contracts would have to include the stay. And because the rule applies to every big bank, the hedge funds wouldn't have much negotiating leverage; it's not like you can go elsewhere for more favorable terms.
The market is rough.
Josh Brown: "The Relentless Bid era has come to a close. This is the next era, it's already begun." "Hedge Funds Sideswiped by Oil, Stocks, Credit, Merger Breakdown" pretty much sums it up. The AbbVie/Shire deal looks pretty dead. You probably shouldn't have been short Treasuries this month, as Goldman Sachs had recommended. The CFA Institute's members also seem to have been wrong about what asset classes would do well this year. And was yesterday's volatility really about 179 "mini flash crashes" due to a lack of liquidity? Ha, no, but a guy in that article says "This was a pukage," so I'll allow it. And: "This is the dark side of efficient markets: systematically high volatility and an entire industry that exists to exploit and exacerbate it."
Are Herbalife clubs a scam?
Here's an interesting and textured but inconclusive Al Jazeera investigation. Some people start Herbalife nutrition clubs because they're promised riches, are pressured to spend a lot of money, and never get anywhere and end up quitting and feeling aggrieved and poor. Other people seem happy with it. I guess that's a story we've heard before. Here is John Hempton on Nu Skin's capital structure.
Things happen.
The Russian hackers who didn't steal any money from JPMorgan also didn't steal any money from the JPMorgan Chase Corporate Challenge. A bankruptcy judge may not keep the Apple/GT Advanced contract terms secret. Fidelity and Betterment are joining forces to provide mass robo-advice. Sallie Krawcheck has "never written a personal mission statement," which I find a bit surprising. Jay Leno has a new CNBC show. At 113, Woman Lies About Her Age So She Can Join Facebook. "How you can profit from Ebola." These Canadians Invented A Chin Strap That Generates Energy When You Chew.