Google Acquires Wiz for $32bn

Google has acquired Wiz, a cloud security company founded in 2020 that works across multiple cloud environments led by Assaf Rappaport (who previously founded Adallom, a cloud access security broker sold to Microsoft for around $320m). 

Wiz frames itself as "A new operating model for AI-era security".

Google was advised by Bank of America and Freshfields.  Wiz was advised by a slew of investment banks, including Barclays, JP Morgan, Morgan Stanley and Goldman Sachs.

Bank of America has expanded its technology banking team, including hiring Jason Rowe of Goldman Sachs and others from JP Morgan and Centerview Partners (Gary Kirkham).

JP Morgan Hiring Technologists to "Potentially Transform Financial Services"

JP Morgan has taken a bet on machine learning hiring Manuela Veloso, head of CMU's machine learning department, in May.

"US Consumer" credited for JP's 8.3bn USD Q2 2018 Profits

This is an 18% increase from 2017 and just shy of its record $8.7bn profit in Q1. Dimon said "consumer and business sentiment is high" in the US. There are concerns about "flattening of the yield curve", with the Fed raising short-term rates, but keeping long-term rates more or less stable, which could be a precursor to economic slowdown. Citi also posted strong results but Wells Fargo came in below expectations.

A New CEO for the Harvard Management Company

NP Narvekar will succeed Stephen Blyth as CEO for the Harvard Management Company (HMC) in December 2016, following the latter's resignation in July 2016. HMC is the management company for Harvard's $35.6 billion endowment.

Blyth joined HMC in 2006 from Deutsche Bank, where he served as Managing Director of Global Rates Proprietary Trading, based in London. He has also traded interest rate derivatives for Morgan Stanley in New York and is an alumnus of Harvard himself, gaining a PhD in statistics.

Narvekar also comes from an investment banking background. He is an ex-JP Morgan derivatives trader who has since established himself as an endowment manager, most recently running Columbia University's Investment Management Company (IMC). He has an MBA from Wharton.

Record $5.7bn paid by banks for FX and rate rigging

Barclays was fined the most at $2.4bn. The fines were primarily for cartel-style operations in the FX market between 2008 and 2012. Barclay's CEO Antony Jenkins who hails from the British town of Stoke on Trent and has a Cranfield MBA expressed regret at the bank's actions. His stock rallied 3.4%. The fines were from a number of regulators with the US Department of Justice raking in a record windfall in fines. JP Morgan's problems apparently resulted from an ex RBS hire who was brought in as head of G10 spot trading.

America's Distaste of Wall Street's Involvement with Physical Commodities

Summary of the Senate's Findings

November 20, 2014: Report and Member Statements has been published on hsgac.senate.gov ending a two year investigation into Wall Street involvement in trading physical commodities.

Jacques Gabillon was one of the witnesses who gave testimony.

 Much of the discussion revolved around aluminium warehousing and so-called "merry go round" transactions. There was also discussion of so-called "BCR" or bid cost recovery payments.

Focus on Aluminium and Alleged Inflation of the "Midwest Premium"

Discontent among market participants (represented by the Aluminium Users Group, which includes Coca Cola) in the aluminium sector centred around the inflation of the "Midwest Premium" (similar concerns had been raised by industry consumers earlier to the European Commission) and also around extended time to take delivery from physical contracts due to queues at warehouses, created by "merry go round" transactions.

Goldman Sachs entered into a number of these deals with Red Kite (which is said to also hold more than half of the LME's copper inventories).

BTG Pactual Builds up Commodities Presence

BTG Pactual, the Brazilian investment bank, headquartered in Sao Paolo, has set up two commodities businesses, BTG Pactual Commodities and BTG Pactual Commodities Holdings:

• Run by Ricardo Leiman, former CEO of Noble Group.  Good luck Ricardo in building out this new business.  (this begs the question who is the current CEO of Noble Group - this is Yusuf Alireza).
• Shon Loth, a metals warehousing expert, has also been brought in from Noble. Well done Shon, hope you can leverage your warehousing experience effectively at BTG.

Many of the staff are ex-Noble. BTG have apparently spent $300m to build up the business.

Could this be a great time to enter the business? In the wake of heavier regulation, several institutions have pulled back from commodities and revenues in the first half have fallen 25% in 1H 2013 at the top biggest banks. It's been 10 years since the Federal Reserve allowed banks to get involved in this business.

BTG Pactual is controlled by billionaire Andre Esteves, who joined BTG as an IT intern having studied mathematics at the University of Rio and traded through the period of Brazil's hyperinflation. Well done Mr Esteves for creating such a force to be reckoned with in the global banking industry.

JP Mulls Exit in Physical Commodities

In a statement, Wall Street's biggest bank said they were exploring a "sale", "spin off" or "strategic partnership" for their physical arm. The Federal Reserve has been making hints that regulation may aim to separate banks' physical and financial commodity arms. This would overturn a 2003 ruling that enable Citigroup to retain all voting shares of Phibro (which incidentally they later sold in 2009 to Occidental Petroleum - formerly run by Ray Irani, a Lebanese-origin PhD chemist, who started his career in research for Monsanto).

Occidental paid $250m for Phibro, roughly the value of Phib's liquid assets.

At 3s and 6s with GS and JP

Goldman Sachs and JP Morgan both performed strongly in 2012 but how did the two businesses compare both at the macro level and at the individual business unit level?

GS: Net Income = $2.89bn (just under 3 bn)
JP: Net Income = $5.7bn (just under 6 bn)
GS: Net Revenues = $9.24bn
JP: Net Revenues = $24.4bn

GS seems to have been performing decently in rates and credit, but weaker in commodities and currencies in 2012.

Morgan Stanley did pretty badly in Q4. Net revenues were $7bn but income from continuing operations was only $573m. The Institutional Securities Division lost $1.7bn overall -through compensation expense of $6.7bn (lowered from last year) and non-compensation expenses of $5.6bn (up from last year, due to litigation expense, relating to some confusion over loans made to New Century Financial).

RBS Plans Complete Exit from Commodities, JPM Charges In

Eighty percent of the precious metals trading at RBS is in gold, and now RBS wants to disband this business too (in 2010, non-US assets of RBS Sempra Commodities were sold to JP Morgan for $1.7bn). RBS is one of the banks marred in the interest rate rigging scandal.

In contrast, JP Morgan, a licensed depositary for precious metals, has asked the CME for approval for additional vault space and applied to be a weight master for silver. Value chain optimisation - here we come!

18 Months after Bottom of Financial Crisis

Obama attempts reforms.

JP Morgan devours JV Partner in Billion Pound Feeding Frenzy

Having fully digested Bear Stearns and having chewed through the subprime of WaMu, "JPMorgan will on Thursday unveil a £1bn deal to buy Cazenove, the UK broker with which it has had a joint venture for the past five years" says the FT.

JPM Beats Guanabara to the Dining Table in Race for EcoSecurities

A unit of JPM Chase has gobbled up EcoSecurities for £122.9 million after a takeover battle with a bidding rival by the name of Guanabara. "Eco" was involved in one of the world's first CDM (Clean Development Mechanism) projects.

A hungry Jamie Dimon Bemoans "Too Many Banks in the United States")

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slashdividend(jpm, percent(X)). ? X=87.
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Rights Issues Rampant in City of London

Industrial materials firm Cookson has launched a rights issue. They are asking for £240m at 37% discount. The underwriters are JP Morgan / Merrill Lynch. The company is also cutting 1,250 jobs. Last December Cookson sold off its ceramic filters business to companies owned by Sud-Chemie AG, a chemicals company specialising in adsorbents. The history of ceramic filters, including piezoelectric ceramics, is detailed in this article by Satoru Fujishima. Cookson is a member of various trade organizations, such as the CEA, which has over 2000 member companies.

A rights issue is when a company issues new shares (which it usually offers at a deep discount to the prevailing market price; 20% is not uncommon) to existing shareholders. For this reason, the share price of a company usually falls after a rights issue. Essentially, a rights issue gives shareholders first refusal on the right to buy additional shares as compensation for the price fall after a rights issue (pre-emption rights, in other words).

Highly leveraged Xstrata also announced a heavily discounted (66%) rights issue in a bid to slash its debt from $16.3bn to $12.6bn. The issue ran into controversy that major shareholder Glencore was being offered favourable terms (underwriters: Glencore, JPM and DB). Dissenters included the ABI whose members, 400-strong, constitute 20% of investments in the London stock market.

Greedy JPMorgan gobbles up WaMu, will have to digest its sub-prime assets

As part of the deal, JPMorgan Chase will absorb WaMu's subprime and option-ARM mortgages. The emergency sale was announced late Thursday and was arranged by regulators. Deal value was $1.9 billion. CNBC reports WaMu saw an exodus of $16.7 billion in deposits since Sept. 15, in a massive 10-day bank run. The severity and speed of the decline of WaMu prompted regulators to seize control on Thursday night, rather than Friday, which is more typical for bank closures.

BBC reports WaMu "had about $307bn of assets but only about $188bn of deposits, which meant it had to raise funding on money markets, which has become increasingly expensive." Banks are unusual in that its assets are its loans (the reverse of a normal company) and deposits are its liabilities. The size of WaMu's assets have made it the biggest banking failure in history.

Who is WaMu anyway? The bank was incorporated on September 25 1889, providing a vehicle for investing and lending and helping Seattle residents rebuild after a fire. The bank went public in 1983, and within 6 years of going public, the banks assets more than doubled.