Tag Archive | JPM

Volatility with Oil – is it the Next Global Crisis?

SmartStops wants to remind you that it is important to stay protected in the markets.   There’s alot going on within the underlying infrastructure that you may not realize.

from inside flap of The Vega Factor: Oil Volatility and the Next Global Crisis  by Kent Moors

“There is a sleeping dragon at the heart of the financial system. Soon the beast will awake and rear its terrible head, and we will look back on the days of the subprime disaster with nostalgia. In this riveting book by oil industry expert Kent Moors, you will meet the dragon he refers to as oil vega, and you’ll discover why it poses such a grave threat to world economic and political stability.”

“Those familiar with the options and currency markets will recognize vega as the term traders use to denote the rate of price volatility. Expanding upon that traditional usage, Moors coined the expression oil vega to describe the dramatic increase of price volatility seen in the oil markets over the past several years.  In The Vega Factor, he describes how, contrary to popular belief, the current environment of runaway volatility in the markets is not the work of diminishing reserves, manipulation by oil producing nations, or increased competition among nations. Rather, it is a result of a structural flaw in the trading system itself.

Two ETFs To Reap Earnings Growth In Financials

Despite facing new and fresh stress tests, large-cap financial institutions appear to be positioned for earnings-per-share growth in 2011, making the Financial Select Sector SPDR (XLF) and the iShares Dow Jones US Regional Banks Index Fund (IAT) attractive.

According to an article in Barron’s magazine, Credit Suisse expects large-cap financial institutions like Bank of America (BAC), JP Morgan Chase (JPM), Wells Fargo (WFC), PNC Financial Services (PNC), US Bancorp (USB) and Citigroup (C), to witness earnings-per-share growth of 25 percent.  The true driver behind this profitability is expected to be improving credit costs and more active capital management.  Read More…

3 Financials ETFs To Benefit From Interest Rate Jumps

Since the beginning of the month, interest rates have been on the rise pushing yields on 10-year Treasurys over 3.5%, their highest level in seven months, boosting the appeal of the Financial Select Sector SPDR (XLF), the iShares Dow Jones US Regional Banks Index Fund (IAT) and the KBW Bank ETF (KBE).

The most recent implementation of QE2, which includes a $600 billion quantitative easing program and keeping short-term interest rates at near record lows, has resulted in increases in long-term interest rates, resulting in steeper yield curves. Read More…

Three ETFs Influenced By Fed’s Stress Tests

In an attempt to ensure that US financial institutions are financially stable, the Federal Reserve recently announced a new round of stress tests, influencing the Financial Select Sector SPDR Fund (XLF), the iShares Dow Jones US Financial Sector Index Fund (IYF) and the Vanguard Financials ETF (VFH).

These tests are expected to prove a financial institutions ability to withstand another economic recession, in that they would illustrate enough capital reserves to absorb potential losses over the next two years.  As a result of this, large financial institutions that are overseen by the Federal Reserve, like Bank of America (BAC), Wells Fargo (WFC), JP Morgan Chase & Co. (JPM) and Citigroup will likely have to forego significant increases in dividend payments to shareholders to keep cash on their balance sheets.     Read More…

Financial ETFs May Be Hit By Slim Bank Profits

Nearly two years after the unfolding of the global financial crisis, U.S. financial companies are struggling to grow revenue streams and are witnessing increased operating costs, resulting in slimmer profits which could lead to slimmer returns for the Financial Select Sector SPDR (XLF), the iShares Dow Jones US Financial Sector Index Fund (IYF), the Vanguard Financials ETF (VFH) and the KBW Bank ETF (KBE).

According to Bradley Keoun of Businessweek, first-half operating expenses at the six largest U.S. financial companies increased by $7.92 billion, or 5.9 percent over the same period last year, while revenues decreased by $5.6 billion or 2.2 percent.  It’s not hard to see that revenues are not keeping up with expenditures and this imbalance will eventually erode profit margins.  Read More…

5 ETFs Influenced By Global Banking Regulations

Recently, global regulators pushed through increased world banking regulations which will force financial institutions to increase reserves protecting against unexpected losses, with the effects influencing iShares S&P Global Financials (IXG), SPDR S&P International Financial Sector (IPF), the iShares MSCI ACWI ex US Financials Index (AXFN), the Financial Select Sector SPDR (XLF) and the Vanguard Financials ETF (VFH).

More specifically, the new rules are designed to rein in the kinds of risky activities that aided in bringing down the global financial system.  The primary focus of these new rules is the amount of capital that financial institutions are forced to hold.   More specifically, regulators agreed to require banks to hold a specific level of a basic type of capital known as common equity, which is considered the most effective type of capital because it is used to directly absorb losses.  Furthermore, officials agreed large, internationally active banks will have to hold levels of common equity equal to at least 7% of their assets, much higher than the roughly 2% international standard or 4% standard for large U.S. banks. Read More…

Three ETFs To Be Impacted By New Financial Legislation

 After weeks of deliberation, the U.S. Congress passed the final version of legislation for the first major overhaul of the nation’s financial system since the Great Depression, imposing more restrictions on Wall Street and banks having a dramatic effect on stocks and exchange traded funds (ETFs) which track the sector.

This final version will give the government new powers to break up companies that threaten the economy, create a new agency to guard consumers in their financial transactions and shine a light into shadow financial markets that escaped the oversight of regulators.  To be more specific, the law will restrict banks from prop trading by limiting the amount an institution can invest in a hedge fund or private-equity fund to a maximum 3% of the bank’s capital.  Companies most likely to be influenced by this regulation include big players like JP Morgan Chase (JPM), Goldman Sachs (GS), Bank of America (BAC), Wells Fargo (WFC) and Morgan Stanley (MS). Read More…

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