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Posts Tagged ‘information is everything’

Land of the Free’dom’of Information?

Posted by Larry Doyle on April 2nd, 2012 5:53 AM |

Freedom makes all things possible, right? No question.

Information is everything, correct? Also true.

As we pursue the American dream, our ability to access information in order to assess risks and opportunities is paramount to our ultimate success. I personally find this truth to be self-evident. Melding these two basic principles, at this point in our nation’s history, how free is information? Obviously, not all information is free and accessible. In matters of national security, our interests are served by protecting plenty of information.

However, what about other basic information in regard to Uncle Sam’s interactions and exchanges on Wall Street?  (more…)

President Obama, “Are You In?”

Posted by Larry Doyle on May 25th, 2011 7:57 AM |

Information is everything.

Regular readers of Sense on Cents are well aware of my having written that statement on many an occasion. Those on Wall Street who gain early access to critical information have a decided advantage. Those in Washington who gain the upper hand in controlling the flow of information are also at a decided advantage.

As these realities become ever more prevalent, Americans and people worldwide are working harder and digging deeper to attain unbridled access to information in order to determine the truth and promote transparency. With major media outlets often failing us in these pursuits, where do we turn for this information? The internet.

Against this backdrop, I am not surprised to see political powers in Washington accept and embrace the reality of the power of the information superhighway and put an ‘eye in the sky’ in order to monitor the traffic. To what do I allude?  (more…)

What Wall Street Secrets Will FCIC Reveal?

Posted by Larry Doyle on September 2nd, 2010 10:06 AM |

Information is everything.

There is no doubt that the development of the internet and a wide array of websites has led to a significant increase in the amount and quality of information accessed and processed by many. That said, there is also no doubt that there is an equally aggressive, if not public, effort to protect information, privileged or otherwise. Industry and company specific trade secrets can often be the key to developing and maintaining a hard earned competitive edge in the marketplace. I fully support and appreciate those ‘secrets.’ On the other side of this coin, though, there are ‘secrets’ which can often be the key to unlocking bad practices, if not much worse.

On this note, after a day’s worth of travel yesterday, I was particularly intrigued to read the Financial Times’ Probe Chief to Issue Wall Street Data. A few comments. Why is it that the FT’s electronic delivery entitles this article as such, while the hard copy entitled it, Probe Chief to Issue ‘Secret’ Wall Street Data? That one little word, ‘secret,’ is exceptionally powerful. What is Wall Street hiding? Why are they hiding it? Who specifically is hiding it? Do the secrets entail illicit and fraudulent activities? So many questions. (more…)

Why I Think Goldman Is Guilty

Posted by Larry Doyle on April 19th, 2010 9:30 AM |

Information is everything.

Regular readers of Sense on Cents know how often I have raised that point as being perhaps the most important factor on Wall Street. Information, timely access to information, and the reliability of that information all move markets. Who gets the information, how it is processed and shared, and how it is disclosed all play a very important factor in determining winners and losers on Wall Street.

Against this backdrop, why do I think Goldman Sachs will ultimately be found guilty of the fraud charges brought against it on Friday? Based on discussions I have had with Wall Street colleagues, Goldman Sachs utilized a law firm in this specific Abacus transaction which did not mandate full and proper disclosure. As such, I believe the law firm itself will also face potential charges for aiding and abetting a fraud. (more…)

Can We ‘TRACE’ JP Morgan’s Business?

Posted by Larry Doyle on July 17th, 2009 9:09 AM |

On Wall Street, information is everything!! Access to the information is invaluable. Why? Given the speed with which markets move, any early hint of developing news is priceless in terms of the ability to transact quickly and profitably.

Why is ‘high frequency program trading’ viewed with such skepticism? Select participants with advanced computer programs gain access to market flows prior to other participants and are able to act on it. That playing field is not level. I shared my disdain for this practice in writing, “Why High Frequency Program Trading Smells.”

What other battles are being waged by Wall Street firms looking to defend their turf at the expense of consumers and investors? Credit cards and credit derivatives. Which Wall Street firm has the greatest combined exposure to these businesses? None other than JP Morgan Chase.

The Financial Times highlights how JP Morgan Chief Hits at Credit Card Rules:

Jamie Dimon, chief executive of JP Morgan Chase, on Thursday hit out at strict rules on US credit cards, saying they would cost the bank’s lossmaking card unit up to $700m next year.

While Mr. Dimon is railing on new legislation aimed to protect consumer interests in the credit card space, he conveniently avoids mentioning how both JP Morgan Chase and Bank of America are already implementing procedures to skirt that legislation. How might these financial behemoths do that? Shift from fixed rate credit cards to variable rate. I exposed this maneuver a few weeks back in writing, “Banks Build Better Mousetrap.”

Dimon continues his defense of JP Morgan’s franchise:

He singled out the credit card provisions, which from February (2010..LD’s edit) will constrain lenders’ ability to raise rates for risky borrowers, and rules that propose to move most derivatives trading on to exchanges as two contentious areas.

The tough stance by JPMorgan reflects Wall Street’s new-found confidence in lobbying regulators and the government. After keeping a low profile during the crisis, many of the banks that repaid the bail-out funds are becoming more aggressive in Washington.

In regard to derivatives activity, JP Morgan has a dominant position in the market. Why? Their strong capital position, enormous balance sheet, and strong credit rating make them an attractive counterparty for customers. Make no mistake, JP Morgan has a license to ‘print’ money, and a lot of it, across the entire derivatives platform.

While Washington will tout how they are increasing regulation of the derivatives space, this business is truly multi-pronged. There are plain vanilla derivatives in more highly liquid sectors of the market. These ‘standardized’ derivatives will most certainly move to an exchange to create total transparency. Value added for customers will be minimal only because these markets are already fairly well defined and exposed. JP Morgan and other Wall Street firms will cede this ‘standardized’ space while they fight tooth and nail to maintain their enormously advantageous position in the area of ‘customized’ derivatives.

There is little to no transparency in the world of customized derivatives and as a result the bid-ask spreads are very wide. Cha-ching, cha-ching. Jamie and his friends on Wall Street are working extremely hard to keep it this way.

In their defense, it is likely not functionally feasible to move many customized derivatives to an exchange. What should regulators compel them to do? JP Morgan and every other financial firm on Wall Street should have to report every derivatives transaction to a system known as TRACE, which stands for Trade Reporting and Compliance Engine.  This system currently only covers transactions within the cash markets and not derivatives.  What does that mean for investors? No transparency and price discovery for investors in the customized derivatives space. As such, Jamie and friends can keep those bid-ask spreads nice and wide and ring up huge profits in the process.

I won’t make many friends on Wall Street, and perhaps lose some of my current friends, but TRACE should be implemented across all product lines. For those involved in the markets, please access the TRACE system to gain a wealth of pricing data while keeping your brokers and financial planners honest!!

LD






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