The Banking and Strategy Initiative

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It’s Monday Again: 2 days and counting, Larry Summers gets it, Yellen Effect gets it Dollars get sold again (The week ahead: September 16 -20, 2013: US Economy & Markets)

A small respite as the Dollar moved to the very bottom of its range globally will also be a lot of good news for Americans itself despite the incident at the Washington Navy yard. S&P opened near 1700 and equities mirrored a global welcome as scrawny Scrooge MadFed candidate Larry Summers withdrew and what everyone is still scared to say to spoil it with the two day FOMC announcing the taper starting tomorrow, is that it may be the dove,  Janet Yellen after all.

 the prospects of a bleary liquidity hit SuperFed becoming a scrawnyScrooge MadFed retraced as Larry Summers gave in to a Democratic caucus on the Banking Committee, incl Liz Warren and withdrew presumably in favor of Janet Yellen in the Fed changeover. The Fed will go ahead with Tapering as planned and that news is in by Wednesday. (India Morning Report)

The Yellen effect therefore, even brightened Merkel’s chances in the next weekend’s decisive German vote and even as the German Bund held on to 1.57% yields at the 10 year, 10 year yields in the US fell to 2.78% and the 5 year fell much more steeply , for a week or to therefore showing up the steepening curve in full profile before Fed actions nail the shorter end to overnight zeroes (Repos in this case at 0-0.25%) and the 10 year again crosses the 3% mark over which it is increasingly becoming easier for bond investors to count their interest in whole numbers. Investors had been  instead counting pecuniary fractions and infinitesimal decimals as bond yields dipped below 1.5%, which had wiped out interest in that income stream in the last 5 years

Also not just Twitter the social buzz circuit you helped invent, but Chrysler, the car America saved (with Fiat another) is also filing for a mega IPO. Though Fiat’s President Sergi Marchionne is being branded a little of a Larry himself this month as VEBA the Chrysler union that owns 42% is not happy yet with Marchionne’s offer for that 42% it also wants to own before the IPO. Fiat paid only $11 Bln for the slightly under 60% it bought earlier. The 42% is riced t around $4 Bln (trade valuation by UBS) and the unions want $5. C’mon Larry, I mean Sergie!

Twitter is hiding behind the JOBS act that allows them to spring Financials on everyone just 21 days before the final IPO books are opened. Twitter was valued at over $10 Bln in the last PE round for one and they could be selling some of their initial too, and for another Twitter would avoid much bad press over Promoter class shares as they have had three generations of founders before the originals all left. Thus Twitter is in a hurry to get the IPO out before sales actually hit $1Billion and it becomes ineligibl for the JOBS act

When was the last time you saw a College kid frequented company finally getting rich on student pocket money! Facebook has of course transcended that but essentially that is the Twitter  user profile now.

In currencies, The Pound is also due to hit the 1.60 mark but the Dollar may not decline further from here as the Oil and Gold prices correct in state with no wars on the horizon and no big Holiday sending discovered yet though the signs are all there. The banks are taking the drop in refi markets on the chin, JP Morgan even agreeing to losses as it pushes its First purchase business higher at the near 5% mortgage rates now prevalent, which unspoken, is actually the more traditional mortgage business bankers won’t mind getting back.

Consumer credit as we reported alst week was pretty positive on non credit card sending and thankfully it still does not look likely that the cap of 21 cents on transaction charges will be disturbed by the appeal courts OIL and Energy SPDRs saw a lot of new inflows by Friday as war worries receded probably as Global investors look to spread their bond out takes to the ETF world in search of rare unis, Structured deals and even HY business.

Bond investments apart funds would remain in US and EM equities remaining year as the equities respond to the Taper decision welcoming the exit of large funds from BondsWhatever the rel differences between FOMC policy under Yellen and Larry , in rality the FEd would probably spend more time on the American Banking sector than Larry ever wwould have had time for.

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