Blackrock, Credit Suisse and Goldman Sachs line-up to push US stocks higher missing the Cypriot Black Swan
Posted on 21 March 2013
Cyprus is a pesky $10 billion molehill in the view of Blackrock CEO Larry Fink who sees another 20 per cent upside for US stocks. Those never-wrong experts from Credit Suisse and Goldman Sachs are speaking with the same voice.
Stocks of course will keep rising until they start going down. Betting on momentum is a bright thing to do unless something happens to change the game. What if Fink is wrong about Cyprus?
Black Swan events are not only unexpect but unexpectedly disastrous. What looks like a $10 billion hole in some bank balance sheet a long way away can very quickly mushroom into a serious global financial problem, especially in the context of the delicate financial balance in the eurozone, the world’s largest financial bloc as large as China and the US put together.
Detonate a mine in the eurozone and the ripples reach far and wide. Bankruptcy and those that follow a Cypriot debt implosion would disturb the status quo in Europe, and lead to a fresh flight of capital from the periphery to the core nations. Greece could once again get into trouble. Spanish debt costs could soar again. The euro would weaken and the dollar gain, not a positive for US stocks.
Is Wall Street wrong to be so complacent? It made this mistake in 2008 with Lehman Brothers whose bankruptcy the consensus felt could be handled by the banking system. We all know what happened next.
What we don’t know right now is the true extent of the losses that would be suffered and by whom if Cyprus goes belly up. The bill for Lehman was way higher than anybody thought possible and it may be Cyprus with its secretive banking system is far further under water.
You don’t know the unknowns until this is tested and the world of international finance may live to rue the day it pulled the plug on Cyprus. Then the giants of Wall Street will be left running for cover with their clients seriously out of pocket and they enjoy a profitable period of volatility.
Of course that assumes that they are not following their own trading advice in their proprietary activities, and they may be foolish enough to do just that!
Statistics: Posted by yoda — Thu Mar 21, 2013 6:08 am
View full post on opinions.caduceusx.com
Barclays facing $1bn loss from BlackRock disposal
Barclays plans to crystallise a loss of up to $1bn (£630m) by selling its 20pc stake in fund manager BlackRock in a move that will boost the high street lender’s capital buffers.
Barclays acquired the 20pc stake in BlackRock as part of its sale of Barclays Global Investors in June 2009 By Philip Aldrick, Economics Editor
BST 21 May 2012
Barclays acquired the stake in June 2009 when it sold its in-house asset management business Barclays Global Investors (BGI) to BlackRock for $13.5bn. Under the terms of the deal, Barclays was paid $6.6bn in cash and $6.9bn in BlackRock shares.
Announcing the planned disposal, Barclays said its stake was valued at $6.1bn at BlackRock’s closing share price on Friday. However, bankers said Barclays would probably have to sell at a discount to the market price, given the scale of the offer. The pricing is expected to be completed within the next few days.
Although Barclays will crystallise a loss against the purchase price, it wrote down the stake last September to about $5.5bn to comply with accounting standards. As a result, it is likely to book a small gain that will boost its already strong 10.9pc core tier one capital buffer, releasing funds that could be used to increase business and household lending.
The decision appears to have been taken in anticipation of strict new Basel 3 capital rules due to come into effect from January next year. Because BlackRock is a financial services company, less of the $5.5bn book value of the shares will qualify as core capital under the new regulations – weakening the bank’s balance sheet and reducing the buffer against which new loans can be made.
The decision to sell seems to be an effort to avoid the negative capital effect of holding the shares instead of cash.
Under the terms of the deal, BlackRock has agreed to buy back $1bn of the offer. Bob Diamond, Barclays’ chief executive who joined the BlackRock board to speak for the bank’s one-fifth stake in the fund manager, is also likely relinquish his non-executive position as part of the deal.
Barclays Capital, Morgan Stanley, and Bank of America Merrill Lynch are acting as joint bookrunners in the offering.
Statistics: Posted by yoda — Mon May 21, 2012 7:03 am
View full post on opinions.caduceusx.com