Editors’ note: This article was originally published on October 25, 2013. It explains how IEX—the firm profiled in Flash Boys, Michael Lewis’s book about high-frequency trading published today—works to neutralize the advantages high-frequency traders enjoy in the markets.
CNBC reports that US senator Rand Paul (R-KY) will wage a campaign to hold up the confirmation of Federal Reserve chairwoman appointee, Janet Yellen, whose confirmation is expected to take place over the coming weeks. It’s the same message he makes in a video released this week by the Campaign for Liberty.
The numbers: UPS narrowly beat analyst estimates, reporting earnings of $1.16 per share for the third quarter versus estimates of $1.15. Strength in US e-commerce and stronger exports in Europe, the company said, were both part of why total revenue rose 3.4% from the same quarter of last year to $13.5 billion.
Puerto Rico is in a world of hurt. Not only is it impoverished, it’s finding it ever harder to borrow money from financial markets. But fear not, frail Puerto Rico: Speculators are coming to your rescue!
It’s illegal to burn down one’s home for insurance money. However, the same principle does not always hold true in business. In fact, forcing a company to default may just make sense for its investors in the topsy-turvy world of derivatives. That’s how GSO Capital Partners—an asset manager owned by Blackstone—just scored a big win: at least €11.4 million ($15.6 million), according to a Bloomberg report.
The numbers: Nasdaq OMX Group reported better-than-expected results for the third quarter, earning $0.66 per share and revenue of $506 million, up from $451 million last quarter and $412 million in the third quarter of last year. Profits totaled $113 million.
New research from Scott Wallsten, an economist at the Technology Policy Institute in Washington, DC, attempts to show exactly what Americans are missing out on because they’re glued to their computer screens.
Why do JP Morgan’s investors allow Jamie Dimon to stick around? Reports suggest the bank will pay $13 billion–the largest fine ever levied on a US company–to settle a civil case related to its sales of mortgage bonds during the financial crisis. But Dimon is still walking on air. A shareholder proposal that would have split Dimon’s titles of CEO and chairman into two separate roles failed miserably in May. By all accounts, regulators and prominent investors, including Warren Buffett, have no desire to see Dimon go.
If you’ve read Michael Lewis’s book “The Big Short: Inside the Doomsday Machine“—about the build-up to the housing crisis and credit bubble—then you’ll probably remember Wing Chau, a New Jersey-based investment manager who packaged and sold collateralized debt obligations (CDOs). Today it emerged that Chau is under fire from the US Securities and Exchange Commission (SEC), according to an enforcement action (pdf) issued against him and his firm, Harding Advisory, LLC.
Wells Fargo analysts say that the interest rates Americans pay if they lease a car for 48 months are the cheapest they’ve been for 40 years, at around 4.25%. Interest rates on auto loans have continued to fall despite expectations this year that the US Federal Reserve would cut back its monetary stimulus program.
The numbers: Better than expected. Morgan Stanley beat Wall Street’s expectations for both earnings and revenue in the third quarter. The bank saw revenue of $8.1 billion (excluding an accounting adjustment that’s typically ignored) and earnings per share of $0.50, up from $560 million in revenue and earnings per share of $0.28 during the same period last year.
Can hedge funds get their mojo back? Even though they’re still under-performing major US stock indices, the third quarter could have been a whole lot worse.
Regulators in Europe, the US, and as of yesterday, Hong Kong are looking into whether the $4.7 trillion market for currency is being manipulated by a handful of traders in order to gouge their clients and pocket big profits. At face value, it seems impossible that a handful of traders could have a sizable impact on a market so massive. But if currency traders were conferring in group chats (paywall) over how to time their trades to game the system, then they very well might have been able to pull off this heist. (There’s no clear evidence as yet that this happened.)
The numbers: Goldman Sachs reported earnings of $2.88 per share, soundly beating Wall Street’s expectations of $2.44 per share. Although this itself renders Goldman’s earnings a “win,” it’s hard to ignore that this is also the investment bank’s worst quarter since Q2 2012. Revenue fell to $6.7 billion, 22% lower than the second quarter and 20% lower than the third quarter of 2012. Further, the bank’s flagship fixed income, currencies, and commodities trading business took the hardest hit; profits from this unit fell 44% from a year ago.
The numbers: Bank of America reported today that it saw profits of $2.5 billion in the third quarter, up from just $359 million a year ago. That works out to earnings of $0.20 per share, which looks a lot better than earnings of zero a year ago.
Today Twitter made official that it would list on the New York Stock Exchange’s Big Board. It’s one of the first major technology companies to toss off a historical trend; tech companies have traditionally listed on Nasdaq, the world’s first fully electronic stock market. Nasdaq’s loss of Twitter comes at a really bad time; it has been plagued by a spate of technology problems, the most serious occurring during Facebook’s May 2012 IPO.
Fitch Ratings agency just made good on its promise to reevaluate the United States’ credit rating if American politicians didn’t get their act together. Today, it officially put the US on “rating watch negative,” warning that it will slash the country’s prized AAA rating if politicians don’t raise the debt ceiling in time to avoid a technical default on the US’s liabilities.
The numbers: Citigroup reported profits of $2.3 billion in the third quarter, seemingly a huge improvement from the $468 million it earned a year ago. Or was it? Adjusted for one-time charges and credit adjustments, the bank earned $1.02 per share, down 4% from the third quarter of 2012. Citi’s suffering was most pronounced (paywall) in its fixed income (bonds) and mortgage businesses; it’s not the only bank that’s been affected by fears of a pullback in Federal Reserve stimulus, which has been dragging housing markets and the value of bonds downwards since earlier this year.
The numbers: Wells Fargo, the largest mortgage lender in the US, posted slightly better-than-expected earnings for the third quarter: $0.99 per share versus the $0.97 per share Wall Street expected. Revenue fell slightly from $21.4 billion in the second quarter to $20.5 billion; it was also about 3% lower than last year.
Investors have been consumed by one question over the last six months. When will the US Federal Reserve will begin to wind down the bond-buying program known as quantitative easing?
Sovereign wealth funds are booming. Their total value of assets under management worldwide rose from $4.62 trillion in 2012 to $5.38 trillion in 2013, estimates a report released today (pdf) by Preqin, a firm that does analysis of the alternative-asset market (the market for assets beyond stocks, bonds, and cash). That’s the largest increase in assets the industry has seen on an annual basis since Preqin started tracking these funds in 2007.
Not familiar with terms like ‘leveraged buyout,’ ‘distressed debt,’ or ‘capital structure’? If you own a small- or medium-sized business, you might want to consider spending some time brushing up on the lingo of private equity funds, because they may be the ticket to your next big loan.
New data from the US Securities and Exchange Commission (SEC) show that only 3.2% of the orders placed in the stock market in the second quarter of 2013 actually went through.
