2022-10-18
Why doesn’t everyone become a bank
Banks are companies that finance themselves and make profits. Just like regular companies. Except that governments guarantee borrowing undertaken by banks, so that they can be very highly geared and do stuff which has a very low return on assets.
It’s no wonder that GE became a bank under Jack Welch. It’s amazing really that investment banks, which, as Matt Levine points out, are not really banks at all continued until as late as the Global Financial Crisis before they became banks in order to take advantage of the free money that banks can access.
OK, it’s not really free. The cost is big, and fixed, represented by a mountain of compliance. But if you are a bulge bracket investment bank, you can afford a big compliance department, something that your smaller rivals cannot. Wow, is it really surprising that behemoths like JPM and Goldmans dominate the ecosystem? I guess that’s a feature, not a bug.
And then the 2008 financial crisis hit and the independent full-service investment banking model ended. [2] It turned out to be too risky to run a giant institutional sales and trading business without a lender of last resort. Merrill and Bear got bought by universal banks (Bank of America, JPMorgan). Lehman went bankrupt and got sold off in parts to universal banks (Nomura, Barclays).
Goldman and Morgan Stanley did something different, though; they became universal banks. In September 2008, they converted into commercial banks in order to get access to the Fed. And then they came into work the next day and, uh, survived. They did not convert into commercial banks with ambitious plans to get into corporate lending and retail banking, to issue credit cards and mortgages. They converted into commercial banks over a scary weekend in order to keep access to funding for their trading businesses. They were technically universal banks, but really they remained independent full-service investment banks.
— Goldman Has Some New Divisions
Image
Enviva Inc. — biomass Ponzi
Short seller Blue Orca Capital took a shot at Enviva (EVA), a $3.5b market-cap, utility-grade wood pellet producer, claiming that the company is a dangeriously levered serial capital raiser having trouble to support its dividend payment and is greenwashing its wood procurement practices. Bottomline, an “ESG” company that is greenwashing…shocker…
On the date of the report, multiple investigations into the company were announced. Naturally, EVA denied the short-seller’s accusation. Worth noting Jeff Ubben bought $10m EVA shares, supporting the company. Worth remembering how that worked out at NKLA…
H/T Kuppy (kedm.com).
The full report is here.
The above is copied from a ‘trading wiki’ which keeps track of a few stocks that caught my eye. You can access the wiki here.
This house sold as a real word NFT for $175,000 over the weekend.
— unusual_whales (@unusual_whales) October 18, 2022
The way it works:
- The LLC takes ownership of the property
- They tokenize the property & mint an NFT that represents ownership of the house
- Holding the NFT gives you ownership of the actual house pic.twitter.com/fuUl3oGCHx
Wrap
I can’t improve on this:
Markets right now:
— The Kobeissi Letter (@KobeissiLetter) October 18, 2022
1. Oil prices falling like a depression is coming
2. Stocks bouncing like the next bull trap is forming
3. $VIX trading like we are in a bull market
4. Treasury yields up like inflation is 20%
5. Gold down like inflation is gone
We are far from the clear.
The markets are manic depressive. I guess the slow-motion implosion of China explains weak commodity prices, including oil and gold. Stocks are presumably bouncing as the longest of long-duration assets about to benefit from the Fed’s imminent pivot.
An imminent pivot is suggest by this story which says that Kashkari has gone ‘full hawk.’ The guy is shameless, and if the Fed really was going to tighten, would be telling his cronies, not the world (allegedly).
Comments !