|Dow||-2.70 to 17,612.20|
|S&P 500||-1.43 to 2,038.25|
|Nasdaq||+14.57 to 4,675.13|
|10-YR Yield||-.001 to 2.359%|
|Gold||-$3.60 to $1,159.40|
|Crude Oil||-$1.04 to $76.91|
Do the world’s mega-banks do anything on the straight and narrow? Or do they cut corners, rip investors off, violate rules and laws, and otherwise act shady in virtually every business line they operate?
That’s what I’m wondering today in the wake of yet another massive, multibillion dollar scandal!
We’ve already had several years of mortgage investigations at the federal and state levels, which have resulted in tens of billions of dollars in fines.
We’ve already seen multinational investigations into global interest rate rigging, resulting in several billion more dollars in fines.
That doesn’t even include older investigations into the aggressive peddling of dot-bomb stocks by Wall Street banks and brokers to customers — even as they were internally calling those same stocks junk. Nor does it include the lobbing off of lousy “alphabet soup” CDOs, CMBS, ABS and other securities on unwitting investors at the peak of the credit bubble.
|Five global mega-banks, including UBS, have agreed to pay a total of $3.3 billion due to accusations they rigged the foreign exchange market.|
Now, news is breaking in the U.S., U.K., and Switzerland of yet ANOTHER multibillion dollar scandal. This time, five global megabanks have agreed to pay a total of $3.3 billion related to accusations they rigged the foreign exchange market.
The banks: UBS AG (UBS, Weiss Ratings: C) of Switzerland … Barclays PLC (BCS, Weiss Ratings: C-), Royal Bank of Scotland Group (RBS, Weiss Ratings: C), and HSBC Holdings (HSBC, Weiss Ratings: C) of the U.K. … and JPMorgan Chase (JPM, Weiss Ratings: B+) and Citigroup (C, Weiss Ratings: B+) of the U.S.
According to a Bloomberg story, citing British regulators, the questionable conduct covered a shocking period of almost six years! As Bloomberg notes:
“The probes were initially into whether traders colluded to manipulate the WM/Reuters benchmark rates. They have expanded to include whether traders used confidential information to take bets on unauthorized personal accounts, and whether sales desks charged clients excessive commissions. More than 30 traders have been fired, suspended, put on leave, or resigned since the probes began last year.”
Reams of electronic chat room transcripts and other evidence show that traders colluded as packs, referring to themselves as “the players” and “the 3 musketeers.” They also called people not in the know about the manipulation “numpty’s” — British slang for an idiot or dolt.
Shares of many of the largest international banks that trade here in the U.S. have underperformed for some time. UBS’ U.S.-traded shares have actually lost 4 percent over the past year, while HSBC is down almost 5 percent. And even Citigroup is basically trading for the same price now as it did in May 2013, showing little net progress in an upwardly trending market.
|“Big banks are now almost like utilities in terms of the high degree of regulation they face.”|
My advice: Invest in niche banks, brokers and insurers if you like — those that have a unique story or situation that improves their prospects. But understand that the big banks are now almost like utilities in terms of the high degree of regulation they face. Plus, the multiyear, multibillion dollar wave of profit-draining fines doesn’t appear to have crested yet!
What do you think? Are the megabanks so scandal-plagued they’re virtually uninvestable? Or do you think they can put these investigations behind them? What’s behind the apparent lack of ethics here — and is there anything regulators or shareholders can do to get banks in line? Use the Money and Markets comment section as your place to share insights and opinions.
|Our Readers Speak|
So-called “net neutrality” is a big issue in the technology world, one that my colleague Mark weighed in on yesterday.
So how do Money and Markets readers like you come down on the issue? Well, Reader Mike said: “The Internet providers are very much like the earlier phone companies, controlling distribution across large swathes of territory. The competition in most areas is limited to a choice of delivery method: Cable (one provider only), satellite (several providers) and phone lines (again, usually only a single provider to an area).
“The cable companies bundle, unbundle, rebundle, run public relations campaigns blaming broadcasters for higher rates, and all the time raise fees. Choice for the consumer is truly limited. Net neutrality is a broad issue for providers. Treating the internet providers as a utility would well protect the consumer while providing at least some guidelines on pricing and practices of the internet service providers.”
On the other hand, Reader David said: “At its core, net neutrality is nothing more than the U.S. government’s attempt, through the FCC, to regulate the Internet as a ‘utility.’ Utilities are over regulated dinosaurs, and government protected monopolies, that are the antithesis of innovation and consumer service. The adoption of net neutrality will be the beginning of the end of the free, open and dynamic Internet that we all know and love.”
Finally, Reader Al said: “I believe that all web sites should be treated equal and that specific web sites cannot pay an ISP to favor their site. I do believe however that a person (customer) should pay extra for bandwidth over a specified amount and/or for gigabit usage over a specified amount per month.”
Meanwhile, in regards to a couple of the recent columns I wrote while in Europe, Reader Elfriede B. said: “I was in Germany when the Wall came down. The eastern part had to be brought up to par.
“As for the euro, many Germans did not like the conversion and inclusion of other European countries. One reason: Their working force is not the same as the Germans’. As the old saying goes: ‘The German lives to work, the others work to live.’ This has been a problem ever since. The expanded socialism hasn’t helped either.”
Thanks for the insights, Elfriede. I really enjoyed my trip, and am looking forward to traveling as often as possible — and sharing my insights from abroad right here in Money and Markets! Please continue sharing yours as well right here.
|Other Developments of the Day|
In corporate news, Dow Chemical (DOW, Weiss Ratings: A-) hiked its quarterly dividend to 42 cents a share from 37 cents a share. It also said it would purchase another $5 billion of its stock — doubling the size of its buyback program.
On the flip side, retailer Macy’s (M, Weiss Ratings: A-) took the scalpel to its full-year profit outlook after weak third-quarter sales. The company said same-stores sales dropped 0.7 percent, and lowered its earnings per share outlook to a range of $4.25 to $4.35, from $4.40 to $4.50.
The U.S. and China signed a deal in Beijing that’s designed to limit emissions of greenhouse gases by the two countries. It calls for the countries to increase the use of solar and wind power, and it will likely lead to China taking more steps to curb its notorious smog problems.
Will Congress ever get anything important done again? The “lame duck” session that runs for the next few weeks will serve as a testing ground. Then in January, Republicans will take over control of the Senate after already having a majority in the House.
Until next time,
P.S. All enrollment in Martin’s Ultimate Portfolio ENDS FRIDAY! Make sure you click here for details before you miss your chance to profit!