Eleven Years in the Making: Breaking Even on JPMorgan’s Purchase of Bear Stearns

Dec 26, 2019

First Read

Hits & Takes
By JLN Staff

Seventeen years ago today a story about me and this newsletter was published in the Wall Street Journal with the title, “Futures Analyst or a Broker? Skepticism Surrounds Critic.” The article was by Peter A. Mckay, who was a staff reporter at the WSJ at the time and covered the industry for the paper. He wrote this article in November and it sat on the shelf and was massively edited and published on the slowest news day of the year, the day after Christmas. I like to say that it only took the slowest news day of the year and the birth of Christ to get me in the Wall Street Journal.~JJL

BTW, if you want a hedcut like they did for me and this story, the WSJ now has an artificial intelligence tool to make for yourself, if you are a paid subscriber. Mine from the story was done the old fashioned way, by hand. This one above is using the AI tool and from the same picture. Use a picture with a white background for the best result.~JJL

The market report at the end of the WSJ story about me was produced by Oster-Dow Jones. That takes me back a while.~JJL

A year ago, on December 26, 2018, the MarketsWiki page counter was at 138,225,031. Today the pageview counter is at 170,030,910, or 31,805,879 more than a year ago. That is equal to 2,650,489 page views per month.~JJL

A year ago, our top three stories from the previous JLN edition were, Sarah Rudolph’s story in John Lothian News, Scott Gordon: In being acquired by Marex Spectron, RCG retains name, management, and gains global reach. Our number two story was on this list more than once, the Chicago Sun-Times, As holidays approach, judge keeps ex-CBOT chief, 82, in jail over divorce fight. In number three was the surprising (possible) reversal reported by Crain’s Chicago Business CME may expand its board. Wait—what?

A year ago the lead story in JLN was “Behind the Market Swoon: The Herdlike Behavior of Computerized Trading; The majority of trades come from machines, models, or passive investing formulas that move in unison and blazingly fast.”~JJL

Three of my grade school through high school classmates have been named “Chicagoans of the year in music” by the Chicago Tribune. Tim Tuten and Jim and Mike Hinchsliff, along with Tim’s wife Katie were recognized for their bar/club “The Hideout.” They are very deserving of this honor.~JJL

Brian Mehta of Trading Technologies has a “2020 Outlook” piece on MarketsMedia.com.~JJL

Jeff Carter of the Points and Figures blog has a commentary titled “What Is The Biggest Analytical Mistake People Make?“~JJL

Barbara Kearney has a commentary on LinkedIn titled “2020: The Human Decade.~JJL

Goldman Sachs has been crowned the 2019 Corporate Chess League Champions.~JJL


Class Warfare, Inequality Board Game ‘Kapital!’ Sells Out Ahead of Christmas
Benjamin Fearnow – Newsweek
In the run up to Christmas, stores in France couldn’t hold on to copies of a board game that illustrates modern wealth inequality by forcing players to fight each other as they struggle to be accepted by the rich.
Kapital! was created by French sociologist and author Monique Pinçon-Charlot and her husband Michel. The board game pits working and middle-class players against each other as they race toward “tax havens” and ownership of luxurious cruise ships. As France 24 reported Tuesday, the game has become a victim of its own success and sold-out as more than 10,000 copies flew off shelves over the last three weeks. The “class warfare” game pushes poor and middle-income players to become the most “dominant,” as only one player can join the ranks of the uber wealthy. Players accrue social, cultural and symbolic capital as they flirt with becoming the world’s next billionaire.

***** I wonder if you can get a Monopoly in Kapital!~JJL


How a Decade of Drinking Changed the Future of Booze; Craft spirits, mixers and bitters marked the 2010s, as did celebrity labels and Instagram. There are six trends that are here to stay.
Amanda Schuster – Bloomberg
Drink Baby Yoda cocktail, you will—but only for a little while longer, hopefully. The 2010s saw many ill advised drinking trends, ones the average bar denizen will be happy to see the back of. Still, several are poised to influence the way we imbibe in the coming year and beyond. Over the last decade, radical shifts in collective taste, work habits, the way we consume information and even America’s hyper-polarized politics have driven our drinking style.

***** I am thinking of coming out with my own gin. I mean, I have a bathtub already and everything.~JJL


Venezuela’s currency: Worth more as craft paper than as money
Sergio Held – Al Jazeera
Along the cobblestoned streets of the coastal city of Santa Marta, demand for bolivares from Venezuela is skyrocketing, but not for the bills’ monetary value.
Instead of using his homeland’s money to pay for daily essentials in his native country, Venezuelan immigrant Hector Cordero weaves the currency into wallets and purses, which he sells to tourists in Colombia. His artful crafts underscore the creative methods that Venezuelans are using to extract value from a currency that – amid skyrocketing inflation – many consider worthless.

****Or, you can trade the money for the bags used to hold onions.~JJL


America’s Pile of Uneaten Bacon Is the Biggest in 48 Years
Lydia Mulvany and Dominic Carey – Bloomberg
Bulging pork-belly stockpiles come after build in hog herd; As China imports more pork, the belly glut could evaporate
America is sitting on a mountain of uneaten bacon. More than 40 million pounds (18,000 metric tons) of pork bellies, the cut used for bacon making, were sitting in refrigerated warehouses as of Sept. 30, according to U.S. government data released Tuesday. That’s the most for the month since 1971.

*****When I came into the futures industry, I was told three things. One, never trade pork bellies, Two, never have an affair with the bosses wife. Three, never trade pork bellies.~JJL


Tuesday’s Top Three
Our most read story last Tuesday was a look at the varied hobbies of employees at Goldman Sachs in the story, Hobbies of Our People Around the World. Second was Bloomberg’s Capitalists Without Capital Are Ruling Capitalism which looks at companies that do well in the market but have little to no net worth. Third is a repeat, Crain’s Chicago Business CME’s Duffy extends contract, gets bigger bonus


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CryptoMarketsWiki, our archive of the cryptocurrency and blockchain world, is going strong and keeping pace as this area of finance grows and evolves.Recently Updated Pages

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Lead Stories

Eleven Years in the Making: Breaking Even on JPMorgan’s Purchase of Bear Stearns; James Dimon got a $30 stock for $10. It took 11 years to close the gap.
David Benoit – WSJ
When Stephen Bearce bought 100 Bear Stearns shares at about $30 each on Friday, March 14, 2008, he was betting the investment bank would be taken over and he would turn a quick profit. He was only half right.

Angry Farmers, Wild Weather and Trade: A Crazy Year for Corn
Isis Almeida – Bloomberg
Crop proved resilient despite record-late Midwest plantings; Growers should get ‘comfortable’ with the USDA estimates
There was nothing typical about this year’s grain season in the U.S. Midwest, with one exception: The size of the corn crop. Wild weather delayed plantings by the most on record, a strong dollar hurt exports, the trade war with China hit demand for the corn-ethanol industry and early snow meant some growers couldn’t even finish harvesting. Despite it all, the crop proved resilient.

The Corporate Bond Market’s $100 Billion Buyer Is Here to Stay
Molly Smith and David Caleb Mutua – Bloomberg
Foreign demand seen underpinning U.S. high-grade debt in 2020; Global investors flee $11 trillion of negative-yielding assets
The U.S. corporate-bond market’s $100 billion benefactor isn’t going anywhere in 2020. Foreign demand will continue to underpin high-grade debt next year as global investors extend their hunt for higher-paying assets in the face of over $11 trillion of negative-yielding securities around the world, according to market watchers.

Brazil’s Shrinking Rainforest Prompts Nestlé, H&M, Others to Shake Up Supply Chains; Investors also push back and commodity firms urge farmers to maximize existing fields; ‘we have the obligation to act’
Jacob Bunge – WSJ
Brazil’s accelerating deforestation is pressuring food makers, retailers, investors and commodity traders to shake up supply chains in an effort to push back on land-clearing and achieve environmental goals.

SEC wants to let small investors into big IPOs
Thornton McEnery – NY Post
Wall Street’s top watchdog wants mom-and-pop investors to grab a slice of the next Facebook before it goes public — but critics fret that they’ll fall prey to the next WeWork. Jay Clayton, chairman of the Securities and Exchange Commission, unveiled a proposal last week to water down requirements for becoming an “accredited investor” who can pour cash into hot startups alongside hedge funds.

Forget Stock Market Forecasts. They’re Less Than Worthless; Wall Street strategists are issuing predictions for 2020. Ignore them, our columnist says, and invest with cheap, diversified index funds.
Jeff Sommer – WSJ
It is the time of year for predictions and I’ll make one: You will be better off ignoring the Wall Street stock-market predictions for 2020. Strategists, some of whom are very smart, are issuing precise predictions for where the market will be in 12 months and they look authoritative.

State Street CEO Takes the Long View on Shareholder Activism; Ronald O’Hanley discusses the investing giant’s push to target all-male boards and whether index funds can own too much of the stock market
Justin Baer – WSJ
As CEO of State Street Corp., STT 0.24% Ronald O’Hanley is on the front lines of shareholders’ push to bring change to corporate boardrooms.

Exchanges, OTC and Clearing

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Iran Fara Bourse Among Top FEAS Members
Iran Fara Bourse, over-the counter stock market based in Tehran, was ranked second in terms of value and volume of trade and the number of stockbroker companies handling IFB trade in 2018 among 15 members of the Federation of Euro-Asian Stock Exchanges (FEAS).


Five Fintech Predictions For 2020, According To Kleiner Perkins
Jeff Kauflin – Forbes
Monica Desai Weiss is an investor at Silicon Valley venture capital firm Kleiner Perkins, where she focuses on fintech and blockchain. Previously, she led operations and strategy at digital wallet startup Blockchain and was a bond trader at JPMorgan. Forbes spoke with her about the past year in fintech and her top predictions for 2020. The conversation has been edited for brevity and clarity.

Ten Years Of Fintech Megatrends For The Next Decade
Lawrence Wintermeyer – Forbes
Tis the season for predictions as we close out the last ten years and head into 2020 and a new decade of bold technological innovation.
I am not a huge fan of predictions, here are three of my favorite past predictions:

Fintech lenders tighten their standards, becoming more like banks
Shahien Nasiripour – Los Angeles Times
Lara Briehl had a desperate client who was itching to accept an offer.
The man was struggling to pay his bills, and an online lender had offered him a personal loan to pay off some 10 credit cards. Accepting, he thought, would help him escape crushing debt. The interest rate offered, however, was about 10 percentage points higher than on his plastic.

M’sian banks fare well amidst fintech trends, global challenges
Bernama – Malaysiakini.com
Malaysian banks have fared well in 2019 amidst financial technology (fintech) disruption that is reshaping the industry and external headwinds and uncertainties brought by, among others, Brexit and the trade spat between the United States and China.

PayPal Continues to Scout for Potential Takeover Targets; The company, which recently acquired a majority stake in Chinese payment platform GoPay, plans to spend $1 billion to $3 billion on deals next year
Nina Trentmann – WSJ
PayPal Holdings Inc. will continue to pursue potential takeover targets in 2020 amid robust deal activity in the payments sector.


Google’s YouTube Goes To War With Bitcoin And Crypto
Billy Bambrough – Forbes
Google’s relationship with bitcoin and cryptocurrency has long been fraught but it has apparently just taken a turn for the worse.
The search giant previously banned bitcoin and cryptocurrency ads, knocking the bitcoin price, before deciding to allow them again in September last year after three-month block.

State Crypto Efforts Take a Few Steps Forward and Back in 2019
Bloomberg Law
A number of states have taken action over the past year to embrace blockchain and digital currency technologies as crypto legislation remains stymied at the federal level.
The efforts set the stage for even more activity in 2020—and also provide a cautionary tale about how tough it can be to create new crypto policies while also trying to comply with existing laws.

Billionaire Crypto Critic Mark Cuban Says He Owns Bitcoin (BTC), But Gold Has Far More Utility
The Daily Hodl
Billionaire entrepreneur and crypto critic Mark Cuban says despite his lack of affection for Bitcoin, he does hold a small amount of BTC.
In an ongoing back-and-forth with Morgan Creek Digital co-founder Anthony Pompliano, Cuban says he has $549 worth of Bitcoin, which he earned through BTC payments made to the Dallas Mavericks, an NBA team that he owns.

2019: Crypto’s Year of ‘Consolidation & Preparation’
Rachel McIntosh – Finance Magnates
It seems that at the end of every year, cryptocurrency analysts, journalists, and industry players make the same prediction: next year will be the year that institutional capital really comes into crypto. However, as the year comes and goes, expectations are never met, and the cycle continues – surely, next year will be the year.
For most people, it seems that 2019 was certainly not the year.

OKEx Launches Bitcoin Options Trades for Select Clients Ahead of January Launch
Marie Huillet – Cointelegraph
Malta-based cryptocurrency exchange OKEx has launched Bitcoin (BTC) options trading for a select group of traders ahead of a public launch in January 2020.


Trump Senate Impeachment Trial Finds Scant Precedent in History
Mike Dorning – Bloomberg
Parties faced different political backdrop at Clinton trial; Partisan rancor ebbed in 1999 amid risks of drawn-out battle
Bill Clinton’s impeachment two decades ago set the modern template for President Donald Trump’s upcoming trial in the Senate. But the process may be even more contentious this time given sharper tribal divisions in Washington.

Trump’s Trade Wars Expose an Abiding Truth; Free trade turns out to be something that helps a rising great power, until it doesn’t.
Pankaj Mishra – Bloomberg
As the year ends, a partial and brief ceasefire seems imminent in Donald Trump’s trade war on the world. The United States and China may sign a deal as early as next month. But make no mistake: The protectionist impulse behind the trade war remains as ineradicable as ever.

Putin’s Grand Gas Project Makes Sense Now; But not exactly in the way the Russian president envisaged.
Leonid Bershidsky – Bloomberg
In the space of just a few momentous weeks, one of Russian President Vladimir Putin’s most ambitious projects — a Russian natural gas export system to match the new geopolitical reality rather than the Cold War-era one — has taken its final shape. It will probably last, without major change, until the end of Russia’s run as a top energy exporter.


SEBI Issues Format For Statement Of Deviation
PTI via Bloomberg
The Securities and Exchange Board of India on Tuesday issued a format for statement of deviation in funds raised to be submitted by the listed entities to stock exchanges on a quarterly basis.

Investing and Trading

Year in a word: negative yields; By mid-2019, this once-unthinkable quirk of the bond market had exploded to extremes
Katie Martin 2 HOURS AGOPrint this page1
Negative yields. (noun) Financial-market terminology to describe the situation in which bonds are so expensive that buyers are guaranteed to make a loss.

The quirky markets that offered big opportunities in 2019; From wine and fried chicken to balsa wood — niche trades of the year
FT reporters – FT
While big investors crow about their timely bets on sterling or their clever navigation of eurozone bond yields, 2019 also delivered some bumper returns in more esoteric areas. Here is our pick of the best.

Deflating a Bubble Before It Busts Would Be Huge; Economists are coming up with tools that just might do the job.
Noah Smith – Bloomberg
Economists may be finally closing in on the reason for asset bubbles. How to pop them before they grow too large, however, is a much harder problem.


Banks Own Thousands of Railcars but Don’t Know What to Do With Them; Wells Fargo and other banks lease out railcars that carry coal, grain and other commodities; the business is becoming a weak spot
Rachel Louise Ensign – WSJ
Railcar NOKL 3013 has spent decades hauling grain across the country. Its owner: Wells Fargo WFC 0.02% & Co. Banks including Wells Fargo, Citigroup C -0.22% Inc., PNC Financial Services Group PNC 0.56% Inc. and CIT Group Inc. CIT 0.02% own hundreds of thousands of railcars that carry coal, grain and other commodities through North America. It is an unusual line of business for lenders, which typically focus on more traditional loans and deposits. Now the niche has become a headache. Tepid railroad demand and changes in commodity markets have made it a rare weak spot in commercial lending.

Invesco is worst-selling fund manager in a year to forget; $5.7bn Oppenheimer deal fails to spur growth while Neil Woodford casts shadow in UK
Owen Walker and Richard Henderson – FT
Speaking to an audience of several hundred investment professionals in New York this autumn, Martin Flanagan, chief executive of Invesco, painted a bleak picture of their industry.


China Plans New Push to Revamp State Firms Starting Next Year
Bloomberg News
Regulator will also tighten evaluation of SOE performance; China will accelerate mixed-ownership reform: newspapers
China’s policy makers will unveil a three-year action plan in early 2020 on the reform of state enterprises, with an aim to improve the performance of the sector and create world-class champions, according to state-owned newspapers.

Indonesia’s Bond Metrics Suggest Outperformance Against India
Marcus Wong – Bloomberg
Indonesia has yet to take back all of its 2018 rate hikes; India boosting the foreign cap limit may trigger more inflows
Indonesia and India, often looped together because of a welter of economic similarities, face a potentially divergent outlook in 2020 thanks in part to contrasting scope for monetary and fiscal policy stimulus.

Turkey to Set Up Fannie Mae-Like Mortgage Financing Company
Asli Kandemir – Bloomberg
Turkey will establish a new mortgage financing firm, similar to U.S.’s Fannie Mae, that will issue and sell mortgage-backed securities to facilitate housing ownership for lower income citizens.

Vintage Chinese teas are beating stock, commodity indices as prices soar at Hong Kong auction; A stack of seven compressed cakes of Tong Xing Hao Puer tea from the 1920s went for HK$8.4 million (US$1.08 million) at autumn auction; Surge in prices has followed recent phenomenon in collectibles and memorabilia, from liquor to limited-edition sneakers
Snow Xia – South China Morning Post
Vintage Chinese teas are making a mark for themselves in Hong Kong’s auction scene, with investors and collectors paying record prices, defying the gloom in a city hamstrung by months of political upheaval and a recession.

Indian IPOs fall to four-year low as economy falters
Patturaja Murugaboopathy – Reuters
Indian initial public offerings tumbled to a 4-year low by value in 2019 as the economy slowed, but some analysts are hoping for better in 2020 on the back of potential government reforms likely to boost stock markets.


Don’t Let Church Failings Distance You From God, Pope Says on Christmas Eve
Pope Francis led the world’s 1.3 billion Roman Catholics into Christmas on Tuesday, urging them not to let the Church’s failings lead them away from accepting God’s love.

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