JPMorgan, BofA Trading Revenues Tumble 15%; Blame Lack Of Volatility, "Excitement"

Stop us when you"ve heard this before... and you"ve heard it exactly two times in the last two quarter: both Bank of America and JPMorgan warning their revenue will be down double digits year over year because volatility is so low, and traders are so paralyzed, there is much less money to be made trading either flow or prop, or simply from collecting commissions.

Well, today marks the third time in the last three quarters when both JPMorgan and Bank of America both said - again - that there hasn’t been a rebound in the relentless slump in trading revenue.

Speaking at an investor conference in New York on Tuesday, JPMorgan CFO Marianne Lake said that revenue from trading has dropped 15% so far this quarter compared with the same period a year ago, while Bank of America CEO Brian Moynihan gave the same decline for his firm. Both said the business faces a difficult comparison to last year, when activity spiked after Donald Trump’s surprising presidential election win.

Commenting on the ongoing deterioration in bank revenues, Lake said that “there hasn’t been that many catalysts, it hasn’t been that exciting,” Lake said. “Volatility sill remains pretty low across the spectrum; it’s a very competitive environment.”

Lake spoke alongside Goldman Sachs CFO Marty Chavez and BofA COO Tom Montag, who said at a conference last month that the languor that has plagued their trading businesses in the last two quarters has persisted into the fourth period. According to Bloomberg, Chavez said his bank’s commodities unit is on pace for its worst year in the firm’s history as a public company.

With traditional revenue streams clogged, banks are forced to come up with alternatives. Sure enough, JPM claimed that the lack of volatility hasn’t been a problem in the bank"s corporate and investment bank, where fees should rise in the “high single digits” as activity levels have been healthy, Lake said. And, if passed, the proposed U.S. tax changes should continue to help that business, Lake said.

Clearly markets aren"t too worried, with JPM stock soaring to all time highs, and BofA trading at pre-financial crisis levels.

Dow Hits 23,000 - There's Just One Thing

Just four weeks since The Dow crossed 22,000...but thanks to Goldman, Boeing, Caterpillar, 3M, and JPMorgan (accounting for over 500 Dow points), the mainstream media"s favorite index just topped 23,000 for the first time ever...

With the Top 6 names driving 50% of the index"s move...

However, it seems options traders ain"t buying it...

If everything"s so awesome... why are investors buying Dow protection with both hands and feet?

As retail piles in, so professoinals are hedging to extremes.

Finally - for good measure - "Industrial" Production remains well below 2014 highs... but the "Industrial" Average is soaring...

Would You Pay $2,500 For One Hour With An Equity Analyst? This I-Bank Seems To Think So...

Wall Street equity analysts are paid "yuge" salaries to employee the finance skills they picked up from their business school professors to value various corporate securities and asset-backed securitization structures, among other things.  And while their valuations of those securities have served as a frequent source of comic relief for many of us over the years, no bastardization of basic financial concepts tops recent attempts by the financial elites of the world to place a value on their own services.

As evidence of that fact, we present to you "Exhibit A" from a Bloomberg article published earlier today suggesting that Morgan Stanley, who is still trying to figure out how much their equity research is worth to clients after nearly a year of internal cogitation, is considering asking hedge fund clients for $2,500 for the extreme pleasure of spending just one hour with one of their esteemed research analysts.

Fund managers will have to pay about $2,500 for an hour-long, one-on-one meeting with some of Morgan Stanley’s equity analysts once Europe’s MiFID II financial rules kick in, according to people with knowledge of the plan.

The fee is on top of the annual rate Morgan Stanley plans to charge some clients for basic access to its equity research portal once the regulations come into force in January, the people said, asking not to be named as the negotiations are private. The bank also quoted a small client $25,000 annually for five users for basic equity research access and five total hours of analyst time, another person said.

Of course, any I-banking summer intern could easily spot the outlier in Morgan Stanley"s proposed $2,500 hourly billing rate when matched up against comps from the legal industry.  According to the National Law Journal, even the priciest partners at the best law firms can only command hourly billing rates equal to roughly half of what Morgan Stanley wants.

Meanwhile, the "median" partner at any given law firm only gets paid about one-fifth of Morgan Stanley"s proposal.

As McKinsey & Co. recently pointed out, the end result is that new European regulations designed to separate research and trading revenue for investment banks will likely cost them more than $1 billion as clients become pickier about what they pay for. 

Of course, ultimately the market will set a clearing price for the "value add" of equity analysts...and we"re almost certain it"s going to surprise some folks.

Goldman's Commodity Unit Suffers Worst Q1 In A Decade

Authored by Tsvetana Paraskova via OilPrice.com,

The leading commodities trader among global investment banks, Goldman Sachs, is assessing the future direction of its commodities business, following the worst start to a year in more than a decade, Bloomberg reported on Monday, citing people with knowledge of an informal internal review.

The fate of the commodities business was one of the items on the agenda of a recent board meeting in London in late June, Bloomberg’s sources said on the condition of anonymity.

Goldman Sachs has not reached any decision regarding the unit, and may not be overhauling the commodities division. According to one of Bloomberg’s sources, it is a common practice for a bank to review the performance of divisions that are not doing very well.

In its Q1 2017 results release, Goldman Sachs said that

“Net revenues in Fixed Income, Currency and Commodities Client Execution were $1.69 billion for the first quarter of 2017, essentially unchanged compared with the first quarter of 2016, reflecting significantly higher net revenues in mortgages and higher net revenues in interest rate products, offset by significantly lower net revenues in commodities and currencies and lower net revenues in credit products”.

Goldman did not quantify then the “significantly lower net revenues in commodities”, but according to one of the people who talked to Bloomberg, weakness in the commodities business persisted after the first quarter, and the commodities division’s start to the year has been the worst in more than a decade.

“Commodities has been and still is an important business for our clients and we will continue to invest in it to ensure we are best meeting their needs,” bank spokesman Michael DuVally told Bloomberg in an emailed statement.

According to U.S. Senate report “Wall Street Bank Involvement with Physical Commodities” from 2014, Goldman Sachs’s “commodity revenues were generally under $500 million from 1981 until 2000, and then began to climb, producing four years of relatively high revenues, from 2006 until 2009, before they once more began to decline.” The peak in 2009 was at US$3.4 billion, said the Senate report, quoting a Goldman presentation from 2013.

According to one of Bloomberg’s sources, Goldman’s commodities revenue for 2016 was less than US$1.1 billion.

RBOB "In Danger Of Breaking Down" Amid Record Gasoline Contango

June 2017 gasoline futures are traded at the biggest discount ever to the July contract this morning...

As the front-month futures tumbles to its lowest since September.

As Bloomberg reports, Mizuho Securities" Bob Yawger warns its "not a good sign that gasoline is so weak, so close to Memorial Day and driving season... gasoline in danger of breakdown today."

Paul Brodsky: "Only The Court Jester Gets To Speak Truth To Power And Laugh About It"

By Paul Brodsky of Macro Allocation Inc.

“A stock is like a living organism. A sparrow, say. And we are able to create an emergent-based abstraction of that sparrow, which closely approximates the sparrow itself, accounting for migration patterns, wind, weather, and other variables. We can create a similar abstraction of a stock combining the information from the specific ETFs, which represent its underlying dependencies. And if we apply this to the stock we can predict its delta, following the path of its extracted self, because nature follows abstraction.”

      - Taylor from Billions

Surely, You Jest

The writers of Showtime’s Billions are nothing if not funny. The gibberish above captures perfectly the philosophical yearning of hedge fund men and women in their tortured quest for higher meaning. (As it turns out, the show does not limit its characters to men and women. Taylor is played by an actor that self-identifies sexually in real life as “non-binary” and in the show demands the pronouns “its” and “their” instead of he, she, his or her.)

To be sure, “its” description of stocks as create-able and manipulate-able abstractions rings true, especially today when factors exogenous to earnings and commercial prospects seem to influence market prices more than rational demand for equities. Don’t tell anyone but market manipulation is legal when parallel abstractions are created and executed by self-serving political and economic policy makers; not so when they are perpetrated by self-serving financiers. We suspect the show’s US Attorney for the Southern District of New York will eventually inform Taylor that hedge funds don’t get to create and manipulate their own abstractions (and if it wants to do so, then it should work at the Fed).

Another fun second-hand account of the markets was on offer this weekend in an established financial column that criticized how “financial philosopher kings” like to opine on “the meaning of life” and “the nature of happiness” instead of…providing graphs! We were to urged to believe, we suppose, that graphs are more scientific and allow anyone to more accurately extrapolate the future from the past.

The column’s current steward (it has been around for decades) then endorsed an analyst who noticed “booming” trends in US interior cities and millennial labor participation (for which he presumably had many graphs). Awkwardly, the analyst concluded there will be only modest moves in stocks and bonds, and so the column successfully expended a thousand words to inform readers that financial markets still exist. Some of those words were ironically spent informing readers that a picture is worth a thousand words, and so it may have been more efficient (and less ironic) to instead paste a pinup of Warren Buffett, the biggest supporter of buy-and-hold-no matter-what investing, on a graph of the S&P 500:

Buffet is still a forward-looking philosopher king but stays mute when valuations are high. We are more drawn when values are high to those like Paul Tudor Jones, who allegedly told a private meeting at Goldman Sachs that the Fed should be terrified to look at a chart, ironically cited often by Warren Buffet, that shows the stock market woefully out of balance with the broader economy.

Graphs themselves are funny things. Trying to gain insight by identifying trends without ratios, which provided context, is like trying to clap with one hand. Booming cities based on health care revenues is a signal to us how tenuous economic growth is, not how strong or sustainable it may be.

Alas, our personal fate is not to have billions, or to play an asexual financial automaton on the show of the same name, or to be a financial philosopher king. We will have to be satisfied with being invited to Court every now and then, even if it is as a jester. Who else can speak truth to power and laugh about it?

US Macro Data Crashes Most In 7 Years - What Happens Next?

The last week or so has seen both "hard" real economic data and "soft" survey data disappoint notably.

This has sent the Citi Macro Surprise Index plunging to 5-month lows with its biggest drop since 2010.

The question is - what happens to the stock market next?

Of course this is no surprise to bond traders...

How Antonio Lee Snuck A Fake $3.6 Trillion Acquisition Past The SEC

Antonio Lee, "an American entrepreneur" and "world renowned artist," can be described as almost anything except humble..."scam artist" fits pretty well.  According to his official bio, Lee began his career in the cosmetology field, "as a barber", but quickly decided he was better suited to raise a $1 trillion "art investment fund."

Antonio Lee (born Antonio Luis Winters; July 14, 1984) is an American entrepreneur, world renowned artist, and YouTube celebrity specializing in acrylic painting. He is well known for his work in the field of Scientific and Performance Art. Lee is the grandson of renowned African-American artist, Annie Lee. Lee credits inspiration to Pablo Picasso, Leonardo Da Vinci, Annie Lee, Jean Michel Basquiat and Damien Hirst.

For the early part of Lee’s professional life he worked in the field of real estate and cosmetology, as a barber. However, he was severely injured during a case of police brutality. After much rehabilitation therapy Antonio Lee was able to regain mobility, but he is now limited in his range of motion as well as tolerance for sitting and standing.  Lee is the father of three girls Malia Lee, Naima Lee, & Ziya Lee. He married in 2011, however, due to marital hardships, he and his wife divorced in 2013. This injury took a toll on Lee, causing him to suffer from major depressive episodes.

In 2013, Lee founded YNoFace Holdings, a Wisconsin company, the first art investment fund created by an artist, that has offered the first issuer- issued private offering under the Jobs Act.

If fact, for those among our readership who would like more information, here is brief overview of the "YNOFACE Holdings" art fund that "acquires, markets, and holds original art as a capital appreciation investment based off the fundamental metrics"...seems solid.

YNOFACE Holdings Inc. acquires, markets, and holds original art as a capital appreciation investment based off the fundamental metrics. We are the first investment art fund created by an artist, world renowned scientific artist Antonio Lee. In addition we are made up of 17 independent contractors and growing. We will upload and share our 41 city global art tour and performances right here on YouTube for your enjoyment! We will showcase our art and the art of the world from a different perspective! Enjoying and Appreciating All That Exists!

And while all of the above from YNOFACE Holdings would seem odd enough, things took a turn for the truly bizarre recently when Lee decided to post an official 8-K with the Securities and Exchange Commission announcing the sale of his art fund to Google for $3.6 trillion, making him easily the wealthiest man in the world.  Per Bloomberg:

A few hours after the New York market close on Feb. 1, an obscure Chicago artist by the name of Antonio Lee told the world he had become the world’s richest man.

The 32-year-old painter said Google’s parent, Alphabet Inc., had bought his art company in exchange for a chunk of stock that made him wealthier than Microsoft Corp. co-founder Bill Gates, Berkshire Hathaway Inc.’s Warren Buffett and Amazon.com Inc.’s Jeff Bezos -- combined.

Of course, none of it was true. Yet, on that day, Lee managed to issue his fabricated report in the most authoritative of places: The U.S. Securities and Exchange Commission’s Edgar database -- the foundation of hundreds of billions of dollars in financial transactions each day.

All of which, of course, simply serves as a reminder that pretty much anyone, including a former barber turned trillionaire art collector from Chicago, can dupe the SEC.

For more than three decades, the SEC has accepted online submissions of regulatory filings -- basically, no questions asked. As many as 800,000 forms are filed each year, or about 3,000 per weekday. But, in a little known vulnerability at the heart of American capitalism, the government doesn’t vet them, and rarely even takes down those known to be shams.

“The SEC can’t stop them,” said Lawrence West, a former SEC associate enforcement director. “They can only punish the filer afterward and remove the filing from the system."

After the fraudulent Avon filing, U.S. Senator Chuck Grassley, the Iowa Republican and former chairman of the Finance Committee, told the SEC it must review its posting standards.

“This pattern of fraudulent conduct is troubling, especially in light of the relative ease in which a fake posting can be made,” Grassley wrote in a letter to the agency.

In response, Mary Jo White, who then chaired the SEC, said it wouldn’t be feasible to check information. She noted that there were on average 125 first-time filers daily in 2014, and the agency was studying the strengthening of its authentication process.

In fact, as Reuters pointed out last fall, Lee"s February filing with the SEC wasn"t even his first act of securities fraud as it was preceded by another fraudulent filing in which he purported to have acquired a modest $88 billion stake in BAML.

In the latest apparent spoof on a U.S. securities regulator"s online filing system, a Chicago-area artist with a fondness for inspirational quotes claimed to have acquired about $88 billion worth of Bank of America Corp shares on Wednesday.

While the SEC did not respond to a request for comment and Bank of America declined to comment, securities experts said there was no doubt the filing was a hoax.

In it, a company called YNOFACE Holdings Inc purportedly run by Antonio Lee said it had acquired 798.4 million Bank of America shares in an exchange on Aug. 15, and purchased another 4.2 billion common shares and 100 million preferred shares on Sept. 22.

The common shares alone would represent nearly half the bank"s total market cap. Bank of America"s largest shareholder, The Vanguard Group, has roughly 610 million shares, a stake of less than 6 percent.

In an earlier filing, YNOFACE said it had implausibly raised over $1 trillion for an art fund.

So, caveat lector -- let the reader beware.

US "Too Big To Fail" Banks Top $1 Trillion - What Happens Next?

For the first time ever, the market cap of America"s "Big Four" banks topped $1 trillion having surged 30% since Donald Trump was elected president. While to some this is cause for celebration, we note that the last time a nation"s "big four" banks topped $1 trillion in market cap did not end well...

As Bloomberg notes, the four biggest U.S. banks were worth the most on record versus China"s "Big Four" this month, as JPMorgan, Wells Fargo, Bank of America, and Citigroup were worth over $250 billion more than Industrial & Commercial Bank, China Construction Bank, Bank of China, and Agricultural Bank of China combined.

The four Chinese banks, the world"s most profitable, were worth about the same as the U.S. foursome as recently as June.

However, as the chart above shows, while the American quartet"s combined market value closed above $1 trillion for the first time last month, China achieved that goals in June 2015... and it did not end well.

DOJ Probing People Who Worked In Deutsche's Mortgage Unit To "Hold Individuals Accountable"

Deutsche Bank employees who were engaged in the actual trades that ended up costing the bank a $7.2 billion settlement at the end of 2016, and who were hoping to quietly get away without criminal or civil charges, are set for disappointment because as IFR reports the DOJ is probing for potential fraud by individuals who worked in Deutsche Bank"s mortgage unit in the run-up to the financial crisis. 

The investigation of former Deutsche staffers is a push to hold individuals accountable for their role in the housing crisis, IFR"s sources said. The probe follows Deutsche"s multi-billion settlement in December with the DOJ over the sale of toxic residential mortgage securities between 2006 and 2007. Observers were surprised when no individuals who worked at Deutsche were named in the settlement, leaving shareholders to foot the bill.

Now, the DOJ"s fresh probe leaves open the possibility of pursuing individuals who had worked at Deutsche. Confirming that there has been no individuals have been exempt from personal liability, in the January 17 press release outlining the facts, finalization and terms of the settlement, the DOJ said that the settlement with Deutsche does not release any individuals from potential criminal or civil liability.

Speaking of which, has anyone seen Greg Lippman these days?

* * *

Separately, and presaging what will soon take place in Deutsche Bank, Reuters writes that the DOJ in December named two former Barclays RMBS staffers in a civil suit it filed against Barclays and some of its US affiliates. The complaint against Barclays alleged that the bank and its staffers fraudulently sold tens of billions of dollars of RMBS, and repeatedly misled investors about the quality of the mortgages backing those deals. The individuals named in the Barclays complaint, Paul Menefee and John Carroll, have obtained their own legal counsel, a Barclays spokesperson said. Menefee was Barclays" head banker on its subprime RMBS securitizations, and Carroll was Barclays" head trader for subprime loan acquisitions.

"It is surprising and extremely disappointing that the government decided to file this highly unusual lawsuit. John Carroll intends to challenge these ill-conceived and baseless allegations, and expects to be fully vindicated," Crowell & Moring partner Glen McGorty, who is representing Carroll, said in an emailed statement to IFR. A response to the complaint against Carroll has not yet been filed, McGorty said.

Lawyers for Menefee did not immediately respond to requests for comment. No filing has been made on behalf of Menefee, according to a search of the federal court docket. Barclays previously said it rejects the claims made in the complaint.

"Barclays considers that the claims made in the complaint are disconnected from the facts. We have an obligation to our shareholders, customers, clients, and employees to defend ourselves against unreasonable allegations and demands. Barclays will vigorously defend the complaint and seek its dismissal at the earliest opportunity," the bank said in a statement.

The 5-Step “Evolution” Of A Family Office

By Chris at www.CapitalistExploits.at

Warning: This story is entirely fictional except for all the parts which are not. It is the story of a 5-step process of the "evolution" of a family office.

I felt compelled to pen this missive since it’s representative of so many family offices out there and maybe in doing so one or two save themselves some potentially painful headaches.

Step 1: The Patriarch Builds His Wealth

This is the story of Hans Krapenschitter and his progeny. It was in the late 80’s that Hans, then in his 30"s, made his fortune. Germany was gripped by recession, factories had closed, people had lost their jobs, real estate prices had plummeted, and so too had hemlines. Horrid stuff.

Gurus emerged, telling everyone that the world would never again see greed, avarice, easy credit, or mini skirts.

 

Instead, the future lay in gathering kale and cabbages from local community gardens, and being subjected to films where “maidens" in long flowing dresses and bonnets roamed meadows, gathering daisies, while falling in love with schoolteachers. There"d be no films where people got punched and shot and even at the raunchiest of clubs, girls skirts would be well below the knee-line.

To Hans, this all sounded like a worst nightmare come true, and knowing a little bit about human nature Hans saw his opportunity. Bucking the trend, he started a company producing T-shirts with skulls on and slogans such as “Ich werde deinen Arsch treten” (I’ll kick your ass).

In addition, he began making the most outrageous revealing woman clothing he could think of. If the world was to devolve into a global version of the Sound of Music, it wasn"t going to do so without a fight from Hans.

Fortunately for Hans the recession ended and greed, avarice, and easy credit return with a vengeance. The easy credit helped fuel Hans" business growth, and he captured the vast market share for a new zeitgeist, as footballers" wives became celebrities and women clothing prices became inversely correlated with the amount of material used. The good times were back. 

Ummmm, ok.

Step 2: The Bankers Take Notice

After depositing some sizeable checks with his local bank Hans receives a letter from the bank.

"Dear Mr Krapenschitter,

Let me introduce myself. My name is Mr. Frederick Arsenlichker, and I am delighted to have been appointed as your private banker. We at Ditschke Bank pride ourselves in providing outstanding personal service to our most valuable clients, and I will be at your service to provide you with our most exclusive range of services which are now available to you.

Please let me know a suitable time for us to meet in person to discuss your business and needs.

Sincerely,

Frederick Arsenlichker (Private Wealth Management, Ditschke Bank)"

Hans is flattered. He feels valued, not really understanding what just happened (what it really means is that he’s now in line to get spammed all the products the bank has on offer - whether he wants them or not and whether they"re any good or not).

Now to Frederick...

To understand Frederick, he’s a guy who spends over an hour in the bathroom every morning, double checks his fringe when passing anything with a reflective surface, and now in his mid-30"s has learned all the ins and outs of sales. To be sure, he’s great fun to have a drink with and knows enough about his products to sound awfully smart to the layman. He"s damn good at selling the bank"s products, but he"s never had to manage risk - and this is where the real problems surface (as you’ll see).

This isn"t his fault. He’s spent his life on the sell side. Fortunately Frederick is smart and he knows what he doesn’t know. Many like him are like 10-year olds after watching Rockie and, despite not having the muscles and never having learnt how to fight, think they’ve got what it takes to take down 10 men. Just because they’ve watched buy side guys, they think they know what it takes. Most don’t.

Step 3: Hans Needs Help

Hans" business spreads like an Australian bushfire as he breaks into the UK market where "lad culture" is pioneering an entirely new obnoxious breed of buyers, and where there are no ladies, only girls. His clothing brand is THE brand. After securing a distribution agreement with the country"s second largest retailer his wealth accelerates.

Aside from the ridiculous house his wife encouraged him to buy on the French Riviera, he now has more and more money which he realises he should probably do something with.

He"s made a few investments based on "suggestions" made to him by multiple private bankers.

You see, Frederick isn"t the only contact Hans has in banking. Due to his business needs Hans has opened no less than 8 banking relationships and they"ve all taken notice, appointing private bankers to "assist" Hans.

These private bankers regularly invite Hans to private gatherings and to his delight he"s found that tickets to the Grand Prix in Monaco, the finals of the European football championships, and the like are easy to come by. Not that he couldn"t pay for them if he wanted to, but it"s nice to get free stuff. The problem is that Hans is feeling a little overwhelmed. All this wealth comes with the responsibility to manage it.

He’s known Frederick for several years now and likes him. Many of these other private bankers are a bit too aggressive. There was that one Spanish banker, Eduardo, who tried to get him a prostitute the last time they were at a special cocktail function put on by the bank. He didn"t think his wife would appreciate that.

Frederick, on the other hand, has about 100 clients like Hans who he “manages”. He’s getting sick of a base salary with commissions bonus, having to clock in and out of his cubicle like a well trained gopher, and the intellectually vaporise environment of a big bank is suffocating.

On the sly, he’s been looking to leverage his network of investors and putting out feelers.

Step 4: Hans Hires Help

Hans: "Frederick, I"m swamped here. I"ve known you for a long time now and I trust you. Do you by any chance know of someone in your field who you"d recommend to help manage my money full time?"

Frederick: "Funny you ask. I"ve been thinking of doing just that myself for a number of clients and would be very interested in doing this for you."

Over some schnapps and sausages, Frederick becomes CIO of the Krapenschitter Family Office, and at long last he can take off the bloody suit and tie and dress in jeans and T-shirts because Hans, after all, has made a living out of clothing that bankers would never wear.

Step 5: The Muddle

And now Frederick must learn really quickly the difference between selling product and investing in product. He quickly reaches out to all his private banker buddies and sources a number of products which Hans can allocate capital into. Since the banks are large fee generating businesses they have two mandates:

1. Generate as much fees as possible and


2. Try keep your clients

Managing the two is tricky business. It requires gently raping the client, but not too roughly that they feel the pain.

One lesson that Frederick has learnt from his years at the bank is that clients hate losing money. As such, fixed income is an easy sell. The fees are still pretty reasonable, and importantly you typically get to keep your customers as you can"t lose money on fixed income, right? Ah well, sort of.

What the Sales Guys Don"t Fully Understand

Frederick"s buddies are all selling either fixed income products or the latest best thing: Low volatility funds. It"s the place to be.

You see, they"ve done nothing but go up for their entire careers (which is to say a decade, two at most). Experience has taught them that this is what works. Their only sense of history is that the iPhone never used to take pictures, like waaay back, and how mad was that?

Frederick"s buddies know only that the firms they work for are pushing them to sell these products.

What they don"t know is that the low volatility funds they"re selling are being repackaged into synthetic bond like products and sold to institutional dumb money.

The way it works is that the proprietary desks write options against these funds and thereby deliver a steady stream of income. This gets packaged and sold as "yield bearing" instruments to pension funds and other dumb money. "They"re very low risk," the salesmen say because these are solid equities with extremely low volatility. They"re almost like bonds. No, really.

Some of the proprietary traders (the older ones) know the risks and many don"t really get it. But so long as Frederick and the long list of clients in the banks" affiliate network keep buying the products, these babies are guaranteed cash cows.

Frederick, after having been in the business for enough years, realises that equities should make up a decent portion of Hans" assets. Because he doesn"t follow the markets (I mean, he watches Bloomberg and CNBC but couldn"t tell you what drives liquidity, cross border capital flows, money velocity, or why anyone should track the gold price) he"s got no sense of market cycles, and simply becomes an asset allocator reliant on his buddies (who are all sell side, remember?) for advice.

And so Hans" portfolio, on paper, looks pretty reasonable, while sporting the kind of risk that Evel Knievel would have shied away from.

Hans is presented with some investment opportunities and, knowing nothing about them, passes them to Frederick to review. Frederick takes a look.

A gold fund? Why on earth would anyone invest in a gold fund, he asks himself?

He googles the gold price and finds that it"s been in a bear market for 20 years. What lunatic would invest in this? Crazy!

He emails his buddies asking them if they"ve got a gold fund in their product lineup and what they think of it. One had a gold fund but it was closed down after lack of performance and lack of interest. Clearly this is a waste of time.

And so Hans, the family patriarch and generator of immense wealth, who never understood the difference between sell side and buy side hired Frederick the now CIO of the Krapenschitter Family Office, in charge of over $450 million.

Unwittingly - and neither realise - it both are drawn into a long daisy chain beginning with product sales which nobody in charge of managing the money actually understands. A chain designed to allow the major banks to make money on both the product fees as well as quietly trading proprietary positions against the products sold which generate amazing returns.

Frederick, for his part, wants to ensure he keeps his job and so he essentially benchmarks and follows his sell side buddies, who, in turn, push products the banks need sold.

While all this is taking place, the market builds the momentum for the inevitable – because every market has a cycle and this one is about to turn.

But Hans is on the Riviera enjoying the sunshine and Frederick is looking forward to a holiday with his new girlfriend. He’s going to take her to Ibiza wearing some of Hans latest product line. It’s truly ridiculous and he can’t wait.

- Chris

"A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain." — Mark Twain

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Morgan Stanley CEO James Gorman 2016 Pay: $22,500,000

With all eyes focused on Washington, on a Friday evening, Morgan Stanley just revealed that 58-year-old Morgan Stanley CEO James "don"t call me Jim" Gorman was paid $22.5 million. Despite a notable drop in earnings from expectations and a focus on cost-cutting, Gorman got a 7.1% pay rise (almost double that of Jamie Dimon).

Analysts expected Morgan Stanley to earn $3.155 in 2016. By the end of 2016 the firm realized just $2.756... but thanks to Trump"s election victory, the stock soared...

As Bloomberg notes, Gorman received $1.5 million in salary as well as restricted stock units, Mark Lake, a company spokesman, said Friday. The restricted stock is valued at about $5 million based on Wednesday’s closing price. The New York-based firm will report other components of Gorman’s pay package in coming months.

Gorman’s pay for 2015 was $21 million, down 6.7 percent from the prior year. He typically receives at least half of his compensation in the form of restricted shares. Some vest over time depending on the bank’s return on equity and stock performance relative to the S&P Financials Index, while the remainder vests over three years regardless of financial results. Part of his cash payouts also have been deferred over three years.

The CEO in November made his first sale of Morgan Stanley stock since he joined the bank in 2006. He sold shares and exercised stock options for a net gain of about $10 million, regulatory filings show.

Gorman"s pay raise comes as the firm has shifted its focus toward wealth management with a $1 billion expense-reduction program, improving the wealth unit"s profit margin and increasing shareholder capital return are key in its effort to improve return on equity.

Jewish Trust Sues Deutsche Bank For $3 Billion

Just when it seemed that no more lawsuits are possible for Germany"s largest lender, which over the past two years has settled or otherwise paid billions to set aside a barrage of allegations of wrongdoing leading to the bank"s suspension of bonuses for most senior bankers, today we learn that Deutsche Bank was sued by a Jewish charitable trust in Florida, alleging that the bank wrongly withheld as much as $3 billion from the heirs to a wealthy German family.

According to Bloomberg, the lawsuit claims the bank refuses to return the funds initially deposited by the Wertheim family in accounts opened at what is now Credit Suisse Group AG before the rise of the Nazis in Germany. Those accounts were later transferred to Deutsche Bank, according to the complaint filed Wednesday in federal court by Wertheim Jewish Education Trust LLC.

Deutsche Bank has “refused to cooperate with the heirs of the Wertheim family fortune in the recovery and return of the monies that they are withholding from the rightful heirs,” and preventing the use of the funds for charitable and other purposes, according to the complaint filed in Fort Lauderdale. 

While on the surface, the case looks mindane, the details are interesting.

The charitable trust is an heir to the descendants of Joseph Wertheim, a family that amassed a fortune by building the KaDeWe department store in Berlin and a textile and manufacturing empire in Frankfurt, according to the complaint. One of those descendants, Karl Wertheim, feared the German rise of anti-Semitism in the 1920s, moved his businesses to Spain and opened an account at Credit Suisse in 1931.

The Swiss bank protected the family assets through the rise of the Nazis in the 1930s and during World War II, using secret numbered accounts, pseudonyms and trust accounts, according to the complaint.

When Karl Wertheim died in 1945, the estate passed to his wife, Maria, who managed the fortune until the early 1970s, according to the lawsuit. The fortune included the sewing machine and office-machine business of Hispano Olivetti SA, accounts and investment portfolios in Swiss banks, land in Europe and the U.S. and art collections, it said.  As the health of Maria Wertheim deteriorated, she turned to Ambrosius Wolfgang Bauml to help manage the assets. After she died in 1976, Bauml managed the Wertheim family fortune until his death in 1990, when control passed to the family of Rudolf Sutor.

This is where Deutsche bank comes in: "through a complex series of events, the assets were transferred in 1993 to Deutsche Bank, which misled the Wertheim heirs for many years about the accounts, according to the complaint." The lawsuit thus seeks return of $3 billion and an accounting of the assets in dispute.

Understandably, being quietly accused of antisemitism did not strike Deutsche Bank as proper and it responded that is “taking the matter very seriously,” according spokesman Tim-Oliver Ambrosius. “The accusations are completely unfounded, and Deutsche Bank denies them,” he said. “All proceedings initiated against Deutsche Bank in this matter have been decided in favor of Deutsche Bank.”

To be sure, Deutsche Bank has had "sensitive" exposure in the past. Back in 1998, Deutsche Bank acknowledged that it had dealt in Nazi gold during World War II and said it ""regrets most deeply injustices that occurred.""  The publication of a historian"s report commissioned by the bank, and the bank"s response to it expanded a class-action suit brought by lawyers in New York on behalf of Holocaust survivors against Deutsche Bank which had long been regarded by other historians as having played key roles in the financing of the Nazi war effort.

""Of course these transactions took place,"" said Ronald Weichert, a Deutsche Bank spokesman, referring to the report"s conclusion that the bank had bought more than 4.4 tons of gold from the Reichsbank, the onetime central bank. ""This gold business was normal business during the war."" At wartime values and exchange rates, the gold was worth some $5 million, about one ninth of its estimated worth today.

The bank commissioned historians from Israel, the United States, Britain and Germany to produce an independent report on its wartime gold dealings -- part of a wave of inquiries inspired by developments in Switzerland. The Swiss central bank was the biggest single purchaser of looted gold acquired by Nazi Germany from countries it occupied and from individual Jews robbed as they faced death in extermination camps.

The report said Deutsche Bank channeled gold transactions with the Reichsbank through branches in occupied Austria and Turkey, then a self-avowed neutral power. Of purchases totaling 4,446 kilograms of gold, the report concluded, 744 kilograms were dental gold taken from Jews" teeth, wedding bands and personal jewelry amassed in Berlin by an SS officer named Bruno Melmer.

It is unclear whether DB"s Nazi war effort" roots will be unearthed as part of this lawsuit. However, with Deutsche Bank rolling over on virtually every other lawsuit it has been handed in recent years, it would not be surprising if the plaintiff"s case emerged as strong. Ultimately, should a court find in favor of the Trust, Deutsche Bank may just need to get that refinancing that it avoided when the DOJ slashed its "ask" on the US RMBS settlement by more than half.

Morgan Stanley Cuts Investment Banking Bonuses By 15%, Fires 5% Of Managing Directors

Ahead of a deluge of bank earnings reports starting tomorrow morning, which include JPMorgan, Wells Fargo and Bank of America, and all of which are "whispered" to come in above expectations, an ominous harbinger hit the newswires this afternoon when Reuters reported that Morgan Stanley not only laid off various senior investment bankers last week, just ahead of bonuses season, but also slashed investment banking bonuses by roughly 15% as a result of "a decline in revenue from dealmaking and capital raising across Wall Street."

While individual bankers bonuses fluctuated depending on performance and geographic region, many are said to have received a smaller paycheck for 2016. Furthermore Morgan Stanley, which remains a bulge bracket investment bank and ranked fourth in IB fees last year, also cut more than 20 MDs from its global investment banking division, roughly 5% of total.

While Morgan Stanley, like other major banks, typically lets go of the bottom 5% of its workforce at year-end to get rid of underperformers, the cuts to senior bankers were deeper than in years past, according to Reuters sources. Morgan Stanley also announced the promotion of managing directors on Thursday.

The layoffs will hardly come as a surprise as Wall Street banks have been shedding staff and curbing compensation for years to cut costs. They have also been losing top talent to boutique firms, which can pay a greater portion of compensation in cash. Further pressuring Wall Street"s animal spirits, global investment banking fees across Wall Street declined 7% in 2016 to a three-year low, according to Thomson Reuters data. 

While drops were recorded in most IB vertical, equity capital market fees, which declined 23 percent, were hit the most as a result of a drop off in initial public offerings. IPO activity in 2016 occurred at the lowest levels since 2009. M&A also slowed from record levels in 2015, with global deal volume falling 17%.

Ironically, despite being largely shunned by Wall Street ahead of the election, there is hope that banker compensation will rebound in 2017 thanks to Donald Trump, as a result of more active trading by retail investors, as well as a rebound in bond issuance (with the first 10 days of January already above $100 billion in IG issuance, an all time record) and other M&A and advisory activity.

Morgan Stanley Warns to Sell the Inauguration While Greatly Increasing 2018 Earnings Forecast

Morgan Stanley is out with a helter skelter note of caution on markets, warning investors to sell the Trump inauguration while upping earnings estimates by 18% for 2018 -- citing material upside in earnings and multiple contraction.
 
Plainly, if what Morgan Stanley says comes to fruition, stocks should trade higher on the backs of buybacks, fiscal stimulus, and big corporate tax cuts. However, the sages at Morgan are worried about the recent scale of the rally, coupled with Fed hike fever risks, European uncertainty and of course a rising dollar.
 
They see no near term catalyst to drive shares after the inauguration and suggest investors start to think about getting out.

U.S. stocks have rallied since the election, but it"s time for investors to start thinking about getting out, possibly timed for President-elect Donald Trump"s inauguration, Morgan Stanley said.
 
"We are worried that there is arrogance in telling people that they should be worried, but to stay bullish for now," Morgan Stanley said in a note dated Tuesday.
 
"Part of us thinks we should just sell the inauguration. After all, what incrementally positive and exciting outcomes could be produced in the first few weeks after that?"
 
"To us, it is WHEN, not IF we should fade this recent reflation trade," it said.
 
Morgan Stanley set its base-case target for the S&P 500 at 2300 at end-2017, marking 16.2 times its 2018 earnings forecast, compared with Tuesday"s close at 2257.83.
 
"We can"t help but think that the Republican sweep has created a more uncertain and volatile outlook for the economy and corporate earnings growth," it said, citing risks from a more hawkish Federal Reserve, China"s economic slowdown, a much stronger dollar and European political uncertainty.
 
Morgan Stanley said there was clearly a lot of earnings uncertainty ahead, but it still forecast that the S&P 500 earnings would be about 18 percent higher in 2018 than in 2016.
 
But it noted that the biggest driver of that increase – more than 50 percent of it -- would come from Trump"s promised corporate tax cut to 20 percent from 35 percent. Another 30 percent of the earnings rise over the next two years would likely come from fiscal stimulus and nearly 27 percent from acceleration in share buybacks, it added.

 
One final note of weariness by Morgan is the possibility that companies might pass on cost savings to consumers following Trump"s tax cuts. This abhorrent specter of "competing away" savings is hateful to Morgan and they feel that could pose as a potential pitfall for markets.
 
God willing, our valiant and industrious corporations will continue to gouge us and take said tax savings to increase corporate bonuses for C level executives and execute superfluous share buybacks to further enhance their standing at their local country clubs.

Content originally generated at iBankCoin.com

ECB Lowers Deutsche Bank's Capital Requirements, Allowing It To Pay Bonuses

While Deutsche Bank has had a generally terrible year, with its stock price plunging to all time lows on capitalization (and, at times, liquidity) concerns following the now concluded episode of its RMBS fine which the bank settled last week for roughly $7 billion of which just over $3 billion in actual cash payments, well below Wall Street"s worst case scenario, another far more important open item was whether DB executives and staffers would receive a bonus in a year in which markets seriously wondered if the biggest European bank would get a government bailout.

Here, the the rumormill was in overdrive: in October speculation was rampant was that DB would skip cash bonuses, making payments in shares of non-core units of the bank; other rumors tied bonus payments to the company"s share price, while in yet more rumors, some suggested that DB would cancel or even clawback bonuses for/from former executives.  In any case, had DB not succeeded in settling its RMBS litigation, it was assured that the German lender would not pay any bonuses to anyone.

So now that that particular episode in the bank"s history has been concluded, and the management team got an implicit greenlight to make bonus payments... a new problem emerged: Deutsche would be in further breach of its capital requirement had it made billions in bonus payments.

Fast forward to this morning when the ECB once again rode to the rescue, if not so much of Deutsche Bank the company, then certainly the employees of the German bank, and as Reuters reported overnight, Mario Draghi agreed to lower the minimum capital requirements for Deutsche Bank on Tuesday, "giving the lender more leeway to structure bonus payments and dividends."

Deutsche Bank said the ECB requires it to maintain a phase-in common equity tier 1 (CET 1) ratio of at least 9.51% on a consolidated basis, starting January 2017. This is below Deutsche Bank"s current requirement of 10.76 percent, a threshold the bank cannot fall below this year without having to limit dividends, variable remuneration and coupon payments to holders of Additional Tier 1 instruments, the bank said.

The drop in requirements for 2017 comes after a change in the rules. The ECB now expresses parts of its capital demands as voluntary guidance.

The ECB demanded that, on average, banks hold Core Equity Tier 1 capital, a key measure of their own funds, equal to 8.3% of their risky assets if they are to pay out to staff and investors. Once capital guidance is factored in, the ECB"s demands were stable year on year at 10.1%.

However, as it turns out, when that particular number makes the payment of bonuses impossible, "further revisions" are to be implemented with the blessing of the European Central Bank.

"When Gold Goes Above 1430 We Whack It"

Submitted by Allan Flynn via ComexWeHaveAProblem blog, 

As it goes in silver, so it goes in gold. In London at least. 

In a bid to have UBS reinstated as a defendant in a London Gold Fix antitrust lawsuit, plaintiffs documents submitted to a New York Court last week include explosive chat room transcripts of UBS and traders from different banks encouraging each other to “push,” “smack,” and “whack” gold prices.

The transcripts are equally as startling as those described of banks of the London Silver Fix and UBS given to the court the previous day and described last week in this article.

On December 6th attorneys for plaintiffs in a consolidated class action against banks of the London Gold Fix and UBS, asked the court for leave to amend with a Third Amended Complaint. The TAC includes additional facts based on a “limited set of cooperation materials” produced by former defendant Deutsche Bank, as part of a settlement agreement and further statistical analysis.

Supporting documents say the amended complaint addresses the Court’s October finding that the previous complaint failed to plausibly plead firstly that UBS was part of the antitrust conspiracy, and secondly that the conspiracy existed prior to 2006.

Also, for the first time a gold producer has been added to the class action of those claiming losses in gold trading due to the manipulation. Compania Minera Dayton, SCM the Chilean subsidiary of Australian resources company Lachlan Star is said to have “sold gold on many of the specific days on which Plaintiffs demonstrated manipulation of gold investments” totaling $287.4 million over the period 2004 to 2013.

In support of allegations that UBS shared customer order information and executed coordinated trades to manipulate gold markets, samples of “dozens” of chat room messages between UBS and Deutsche Bank are contained in the revised document indicating "many efforts to artificially suppress gold prices, and to manipulate gold prices at the time of the Fixing.”

Filings include the following script reminiscent of an 1980’s arcade game scene. Rather than competing for business in the marketplace, supposed competitors UBS and Deutsche Bank however are seen coordinating tactics as they anticipate the most illiquid of days to jointly execute their sell orders for greatest negative impact on the market.

Deutsche Bank: bro japan holiday today

Deutsche Bank: think it’ll be quiet

Deutsche Bank: well, illiquid, not quiet haha

Deutsche Bank: illiquid means wild wild west

UBS:okay when gold pops 1430

UBS: we whack it

UBS: u sell your 50k

UBS: i sell my 20k

UBS: then we double that up and produce our on liquidity too

UBS: that should be enough to cap it on a holiday

Deutsche Bank: haha yeah

Deutsche Bank: lol

One chat see"s a Deutsche Bank trader confirming with a UBS trader his trading had indeed influenced the Gold Fix: “u just said u sold on fix.”  The UBS traded replied “yeah,” “we smashed it good.”

The secret associations between traders appear to be close knit, with the members willing to assist their opposite numbers at every chance: UBS “im feeling helpful to ubs today.”  The UBS trader then said “need to push this back wer,” to which the Deutsche Bank trader replied “ok,” and “lets do it.”

Counter-intuitively, the banks special penchant to suppress the price of gold is repeated throughout the examples. As the gold ticker rose on this occasion the indignant traders teamed up to push it back down, commending themselves sarcastically meanwhile.

Deutsche Bank: someone still trying to push our gold up

UBS: so u should pay the mkt right away

Deutsche Bank: nope

UBS: cause chances are someone else got hit and u f*ck them up

Deutsche Bank: no touchy

Deutsche Bank: im short 15k

Deutsche Bank: xau

Deutsche Bank: too much fire

UBS: im gonna sell more silver and gold

Deutsche Bank: k

Deutsche Bank: i really think we are on the right side today, being short

Not only are they pushing the market down but also there appears to be intent to harm client interests as the November 2014 FINMA investigation loosely reported.

Here a UBS trader gives information to a Deutsche Bank trader about a client’s order query on Nov 16th 2010, and strategizes to punish them by whacking the price lower if purchased from another party.

UBS: boc sniffing around in gold

Deutsche Bank: likewise

Deutsche Bank: passed my bid

Deutsche Bank: dude

Deutsche Bank: so their round

Deutsche Bank: is from u

Deutsche Bank: to me

Deutsche Bank: haha

UBS: not always

UBS: anyway good to give each other heads up

UBS: if we find out side, whack it

Deutsche Bank: yeah

Bank of China, one of the largest state-owned commercial banks in China, and which offers customers “a wide range of gold investments in gold bars and gold bullion coins” have yet to respond to this author’s query if the bank could be the buyer referred to as “BOC” in the above conversation.

A central tenant of this lawsuit is that the banks have chosen one particular part of the trading day to act secretly. The strategy of banks that "colluded around the PM Fixing to ensure prices moved the direction they wanted, when they wanted," was enabled in this case by the same Deutsche Bank trader who appears in multiple chats over a period of years with various others sharing their presumably winning strategies around the afternoon benchmark.

2007

During a trading day which had been less successful the Deutsche Bank trader assured his opposite trader from Bank of Nova Scotia that “at least the fix will be fun . . . make it all back there!!!!!! : ?”
 

Another day the Deutsche Bank trader remarked to a different trader at Bank of Nova Scotia “hahahahaha, we were all short going into that fix.”

2008

The Deutsche Bank trader was informed by a HSBC trader: “i kick some out and take it back after the fix,” describing a tactic to sell gold high before the fix and buy it back after the fix at a lower price. Plaintiffs say the traders knew it would nearly always be cheaper after the fix. The Deutsche Bank trader replied ironically: “ yeah no one else is thinking that : - ?.”

2011

The Deutsche Bank trader this time to another HSBC trader: “everyone shrt into the fix i swear it’s the only time ppl trade,” to which the opposite party at HSBC replied “hahahhahahahahahahahha shocking absolutely shocking.”

2012

The Deutsche Bank trader said to his opposite number at Barclays, “im glad u are now interbank.” Barclays trader: "Why?" Deutsche Bank trader: “it’s a good alliance.”

That day the Deutsche Bank trader informed another trader at Barclays, “im a tiny buyer at the mom.”  Barclays trader: “think im buyer too,” Deutsche Bank trader: “means we fix lower.”

An example of further statistical analysis from plaintiff"s Third Amended Complaint, TAC is a chart showing UBS spot gold price quotes over the period 2004-2012. The complaint says the bank "used its transactions and substantial presence in the gold market to drive prices downward, thus playing a key role in the conspiracy."

Deutsche Bank"s proposed settlement of the London Gold Fix class action amounting to $60 million including the provision of cooperation materials was given the Court"s preliminary approval on December 9th subject to a Fairness Hearing. This follows the non-UBS defendant banks of the London Gold Fix; Bank of Nova Scotia, Barclays, HSBC, and Société Générale being ordered in October to face charges in the lawsuit along with London Gold Market Fixing Limited, LGMF a private company owned by the five banks. Deutsche Bank"s settlement offer of $38 million including cooperation materials in a similar antitrust lawsuit involving the banks of the London Silver Fix was given the court"s preliminary approval earlier.

Opinion

The new chat evidence in silver and gold described in this and other articles provides the missing narrative to the volumes of statistical analysis incorporated in the original and amended complaints closely scrutinized by court and counsel at the April hearings. It lifts the curtain for once and all on the dirty role of bank suppression in gold and silver markets, and its not just the London Fix. The Court has already acknowledged plaintiffs evidence of symbiosis between the London Fixes and the pricing of other silver and gold products. The Court"s preliminary approval of the Deutsche Bank settlements may provide for class claims in bullion, coins, options, futures, spot and other markets including exchange traded funds, ETF"s within the US.

The collective evidence also neatly deals with the court"s October supposition that further amending the complaint would be "futile."

Given the damming nature of material against UBS particularly, it remains all the more mystifying why the 2014 Swiss Supervisory Market Authority FINMA report into foreign exchange and precious metals trading at UBS said so little comparatively about UBS" precious metals trading misconduct, and specifically nothing about gold trading misconduct. As discussed in an earlier article, the word “gold” is conspicuously absent from the 2014 report.

Were it not for the early moral act of Deutsche Bank in providing the cooperation materials, which presumably gave them a settlement advantage, UBS directors might be sleeping much easier this week. If the remaining non-UBS defendants agree to settle, which is an increasing likelihood, there will be no need for the court discovery scheduled for 2017 and civil trial beyond. In the meantime we wait to see how long UBS hangs in there.

The appearance of a precious metals producer among the class of plaintiffs will also see shareholders and directors reaching for the calculator. SCM is but one of thousands of producers who have sold precious metal in the US throughout the period and like any other plaintiff if the case is successful could be entitled to treble damages with interest if granted standing.

Plaintiffs analysis indicates that manipulation of the London Gold Fix led to average losses of up to four basis points or four hundredths of a percentage point in the gold price on the days affected. Therefore, a small gold producer similiar to SCM with say $500 million of gold sales over 8 years could tally treble claims of $600,000 plus interest.

Supposing as statute 28 U.S.C. 1961 directs, the present Treasury constant maturities nominal- 1-year interest rate currently at 0.83% is applied to this figure over an average sale date midway through the class period of say December 2008, and an optimistic successful conclusion of the lawsuit comes a year from now. Interest then of $54,793.64 could bring a theoretical claim of $654,793.64 for just one class member like this. In this context Deutsche Bank"s $60 million, plus the cooperation materials supplied, appear to be money well spent.

Trump Said To Consider Jamie Dimon For Treasury Secretary

One week ago, when the prospect of a Trump presidency was "calculated" as being anywhere between 0% and 20% by so-called experts, we reported that Trump"s campaign finance chair, Goldman Sachs partner and Soros Fund management alum, Steven Mnuchin, was being positioned for something much larger as Donald Trump reportedly told his aides today that he wants Mnuchin to serve as his Treasury Secretary.

Now, according to CNBC, Trump has decided to expand beyond just Goldman alumni, and is allegedly considering JPMorgan CEO Jamie Dimon as the next US Treasury Secretary.

BREAKING: Trump advisers considering $JPM CEO Dimon for Treasury post - sources https://t.co/Unij5oIyNe pic.twitter.com/TezAC3aOn0

— CNBC (@CNBC) November 10, 2016

Needless to say, we can only hope that this is an attempt to scare clicks by CNBC instead of the actual truth, because if Trump hopes that he can "drain a swamp" by hiring the swamp puppet master, he - and millions of his supporters - will be very disappointed.

As for Dimon, or Mnuchin, they will be delighted: as a reminder, as Hank Paulson demonstrated so well, the only reason why bankers become Treasury Secretaries, is to be allowed to sell all their corporate stock upon moving to public office, tax free.

That said, as CNBC also adds, Dimon passed on the opportunity: "In the wake of Donald Trump"s upset victory, advisors have floated the idea of naming Jamie Dimon as treasury secretary, according to two people familiar with the matter, but one of them added that the JPMorgan chief has said he would not be interested in the role."