Chillin' out till it needs to be funded
Distressed debt trading and Fixed Income trading no longer engenders the respect it used to get on Wall Street as activist investors come out of the closet to take on the might of Goldman Sachs intelligence and analysis. Apparently all’s not well still at trading rooms even a top firms like Goldman Sachs which ended July and August with much better trading performance than in Q1 and Q2 of last year and were way ahead of JP Morgan‘s “We are sorry” $2 B in losses from a prop trading loss of well near $8 B on its own balance sheet as it committed to proprietary trading thru the CIO’s office to effectively close on hedging regulation as required in the CIO’s office.
JP Morgan’s 20+ loss days in July as it found ways to close the standing losses with unwilling / shuckingly self interested counterparties looked to be behind them but institutional investors and activist splinter groups, are on the prowl as the late shift to mop up the crisis’ loose ends begins.
Among changes at Goldman Sachs, dealmaking teams on the continent are cutting down on requirements to focus on “Verticals” and associates are being asked to work on multiple industry groups to ease things along and help with costs. Apparently this blog’s cross industry preference in investment banking analysis can be held up as a suitable example for those lucky enough to be inside the firms already. The same practice has always been encouraged in the Asian industry esp in the subcontinent, assignations run to ground by deal mechanics on each biggie that the global banks prefer. The Asian market int he meantime has been skinning debt deals to 26% of the $7B Fees collected in the year to date. Equities origination is down 47% in Asia and Bonds and Loans hardly 10%
On the trading rooms however, the requirements of higher capital in Basel 3 on the market risk books and inter bank exposure could be behind the recent noise even as the stand off on the details of a Volcker implementation in US derivatives markets and in “market making” activities in illiquid bonds esp municipals and high yield debt.
According to the Bloomberg report, analysts including Dick Ramdsden also emphasised on the Citi Holdings‘ run off portfolio of $100 B in mortgages which the bank is structuring to save capital while it asked Goldman Sachs and poor follower Morgan Stanley to de-allocate Capital from the trading rooms for High Yield and Fixed Income debt to even buybacks which seems like a perfect ramp for anything else would pay better than trading after a second year of not so superlative performances for a street getting addicted to super performances in a few years like 2006 and 2009
Goldman Sachs has been experimenting with or adopting new lines of business from traditional insurance / reinsurance for its CDS desks and private client wealth management and recently held its AGM in Mumbai, India
Meanwhile the Levin committee has been interviewing bankers and documents at HSBC and goldman Sachs in the investigation to review Jamie Dimon’s ultimate faux pas.