Not Transitory – Fed Liquidity Handout Surges To Near $90 Billion

Not Transitory – Fed Liquidity Handout Surges To Near $90 Billion

So much for the ‘transitory’ liquidity shortage arguments put forth by commission-takers and asset-gatherers, The NYFed accepted $87.7 billion (in o/n and term) repo today – the highest level yet.

The Fed accepted $20.1 billion in 14-day term repo…

And $67.7 billion in overnight repo…

The biggest overnight repo (liquidity bailout) since September.

Having stabilized in the $30-40 billion range, liquidity needs have surged once again as it seems the big banks just cannot wait for The Fed’s NotQE in November.


Tyler Durden

Tue, 10/15/2019 – 08:59

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Who is, and is not, on the Demand Justice #SCOTUS (Not-So) Shortlist?

Demand Justice has released a “shortlist of possible [Supreme Court[] nominees in the next Democratic administration.” The group selected 32 “brilliant lawyers who have spent their careers fighting for progressive values and represent the diversity of our nation.”

Who was selected? The nominees generally fall into 5 broad categories:

  • Academics: Michelle Alexander (Union Theological Seminary),  James Forman, Jr. (Yale), Pamela Karlan (Stanford), M. Elizabeth Magill (Virginia), Melissa Murray (NYU), Bryan Stevenson (NYU), Zephyr Teachout (Fordham), Timothy Wu (Columbia),
  • Progressive Litigators: Brigitte Amiri (ACLU), Nicole Berner (GC SEIU), Deepak Gupta (Gupta Wessler), Dale Ho (ACLU), Sherrilyn Ifill (NAACP LDF), Shannon Minter (National Center for Lesbian Rights), Nina Perales (MALDEF), Thomas A. Saenz (MALDEF), Cecillia Wang (ACLU),
  • Current/Former Government Officers: Xavier Becerra (California AG), Sharon Block (one of the three NLRB appointments at issue in Noel Canning), Vanita Gupta (Former Obama DOJ), Lawrence Krasner (Philadelphia DA), Catharine Lhamon (U.S. Commission on Civil Rights), Katie Porter (House of Representatives), Jenny Yang (Former EEOC Chair)
  • Federal Judges: Richard F. Boulware (D. Nev.), Jane Kelly (8th Circuit), Cornelia Pillard (D.C. Circuit), Carlton Reeves (S.D. Miss.)
  • State Judges: Mariano-Florentino Cuéllar (California Supreme Court), Anita Earls (North Carolina Supreme Court), Leondra Kruger (California Supreme Court), Goodwin Liu (California Supreme Court),

Who didn’t make the cut? We can speculate. In July 2016, the Hill published a potential shortlist from a Clinton administration. Of these 11 names, only three made it onto the Demand Justice List: Judge Jane Kelly (8th Cir.), Justice Goodwin Liu (California Supreme Court), and Justice Mariano-Florentino Cuéllar (California Supreme Court). Eight names were left off the Demand Justice list:

  1. Chief Judge Merrick Garland (D.C. Cir.)
  2. Judge Sri Srinivasan (D.C. Cir.)
  3. Judge Paul Watford (9th Cir.)
  4. Judge Jacqueline Nguyen (9th Cir.)
  5. Judge Lucy H. Koh (N.D. Cal.)
  6. Judge Patricia Millett (D.C. Cir.)
  7. Senator Amy Klobuchar (D-Minn.)
  8. Senator Cory Booker (D.-N.J.)

Garland’s re-nomination was never a serious option. And it isn’t clear that Demand Justice considered elected officials, such as Klobuchar and Booker. But what about the other Obama appointees? The not-so-shortlist excluded many possible nominees-by design. Demand Justice explains:

None of the lawyers on our list are corporate lawyers, in keeping with our call for the next president to avoid nominating any more lawyers who have been partners at corporate law firms or in-house counsel at large corporations. Instead, our list boasts a wide range of former public defenders, public interest lawyers, academics, and plaintiff’s lawyers.

Judges Paul Watford, Sri Srinivasan, Jacqueline Nguyen, Lucy H. Koh, and Patricia Millett all worked in private practice. Those careers, apparently, rendered them ineligible for the Supreme Court. Also excluded is Judge Ketanji Brown Jackson (D.D.C), whom Tom Goldstein tapped to replace Justice Scalia. She worked in Big Law.

Who else would not make the list? Justice Sotomayor was a partner at Pavia & Harcourt. She would have been out. Justice Kagan briefly served as an associate at Williamson & Connolly. Would she have made the cut?

Ultimately, I welcome these lists. They provide the public with insights into the type of jurists an administration would consider. Though, it’s difficult to know how much weight to put on Demand Justice’s roster. Unlike President Trump’s original list, the current list was not released–or even endorsed–by any campaigns.

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Stossel: The Science Around Male Brains vs. Female Brains

Lately, we’ve been hearing that men and women are biologically the same.

A BBC video claims, “There seems to be no purely male brains versus female brains.”

“Seems like we’re just not that different after all,” echoes HuffPost.

Politically correct corporations act as if that were true. When Google engineer James Damore merely suggested that biological differences might explain why half the people in tech are not women, he was fired.

Professor Gina Rippon recently wrote a book that confirms the popular narrative. “New neuroscience that shatters the myth of the female brain” is the subtitle.

Rippon tells Stossel it’s important to tell people that that men’s and women’s brains are the same, so people don’t mindlessly follow gender stereotypes.

Stossel pushes back, “It’s not natural that in school, more boys want to play football and more girls want to do ballet? I want to run and bang into people.”

Rippon responds: “Well, I think actually girls might want to run and bang into people, but because there’s an image that girls don’t do that, they’re stopped from doing that.”

That’s popular to say, but Stossel has covered research that shows big innate differences. In one experiment, students were blindfolded and then walked through the maze of tunnels. They were then asked which direction they’d moved. Men had a much better sense of that than women.

In another experiment, students were left in a cluttered room to wait. Later, women were much better at remembering all kinds of details about that room. Men were more likely to say: “I dunno, some stuff.”

Of course, the students may already have been molded by a sexist society, Stossel notes. But newborns also show gender differences. Boys tend to look longer at objects, like tractor parts, while infant girls stared more at faces.

Stossel asks Rippon about that, who responds: “If you look very closely at the data, a third of the girls actually seem to respond more to the tractor parts than the boys.”

“A third,” Stossel repeats.

“A third,” Rippon replies.

“But two-thirds didn’t!” Stossel retorts.

Rippon says the study should be redone. “Do it again with a bigger set of newborns [and] a better controlled set of stimuli.”

Evolutionary psychologist Diana Fleischman says there’s overwhelming evidence of biological differences.

“Cultures around the world show very similar differences between men and women,” she points out. “Men are more likely to seek status, women are more likely to take care of children. Women are more likely to stay in the home. Men are more likely to do dangerous, aggressive things like go to war.”

Stossel pushes back: “Because we men have been socialized: ‘Work’s important!’ And you women have been told by your mothers, ‘Take care of the kids.'”

“Why would you see that across every culture in the world?” Fleischman responds.

“Even if you look at nonhuman animals…monkeys…they don’t have culture, yet there’s still these very large differences between males and females,” she adds. In those species, too, males focus on war and status, while females nurture children.

Among scientists, these differences are well-accepted, Stossel notes. The journal Neuroscience cited 70 studies that found differences.

Stossel asked Gina about some of the most obvious mental differences.

“I stutter. Most stutterers are boys. It’s not a brain difference?”

“Yeah, yeah. There are those kinds of brain differences and I’m definitely not a brain difference denier,” Rippon replied.

“It’s kind of how you’ve been presented by much of the media,” Stossel responds.

The journal Nature, for example, ran an uncritical review of her book headlined, “Neurosexism: the myth that men and women have different brains.”

The Guardian summarized her book with: “Are there any significant differences based on sex alone? The answer, she says, is no.”

“Perhaps they haven’t read the book,” Rippon says.

Fleishman argues: “Gina Rippon seems to be a sex difference denier depending on kind of what audience that she’s talking to.”

In her speeches, Rippon does say things like: “They’re thinking there’s differences between men and women. People like me stand up and say ‘actually no, there’s not.'”

“It’s an incredibly alluring message,” Fleischman says. “It’s really sad that it’s not right.”

Rippon worries that talk of sex difference will increase sexism, but Fleischman notes that minimizing sex differences can hurt people, too, by pushing them into fields they’re not naturally suited for. Politicians pass laws to force “equality.”

“Saying that men and women have different aptitudes isn’t sexism. It’s actually a statement about the true nature of the world,” Fleischman says. “If we keep saying that those differences in what men and women choose to do are because of sexism, nobody’s going to end up happy with what they’re doing, and we’re going to keep making laws to remedy what’s actually just the result of freedom.”

The views expressed in this video are solely those of John Stossel; his independent production company, Stossel Productions; and the people he interviews. The claims and opinions set forth in the video and accompanying text are not necessarily those of Reason.

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Pentagon Confirms Manbij Handed Over To Russia As US Forces Filmed Departing

Pentagon Confirms Manbij Handed Over To Russia As US Forces Filmed Departing

A stunning development in the key northern Syrian city of Manbij — the Pentagon has confirmed a planned handover to Russian military forces is underway amid a Turkish military assault on the region. This also hours after President Trump tweeted that Assad “wants naturally to protect the Kurds” and that the problem should be left to local powers. 

Late Monday the main US base in Manbij was filmed empty of US forces, and American convoys were also spotted hastily pulling out of the city as Syrian national forces entered, following Sunday’s historic deal between the Kurdish-led Syrian Democratic Forces (SDF) and the Assad government. Newsweek reports the developments follows:

The U.S. military has begun a hasty exit from Syria’s northern city of Manbij, and is set to help Russia establish itself there amid a Turkish attempt to defeat Kurdish-led, Pentagon-backed fighters at the strategic location, Newsweek has learned.

Russian troops in Syria, illustrative file image.

As the Syrian national flag went up over multiple previously US-backed SDF towns on Monday, it was as yet unclear what Russia’s role in all this would be. Through Monday there were also widespread rumors that Russian jets were circling over key border posts as Turkish forces shelled Kurdish positions below. 

The Newsweek report suggests, as we predicted, the blistering fast developments clearly are being driven by significant Russian deal-making among all parties, surprisingly including the US, apparently

A senior Pentagon official told Newsweek that U.S. personnel, “having been in the area for longer, has been assisting the Russian forces to navigate through previously unsafe areas quickly.”

And the US coalition spokesman has now confirmed Newsweek’s reporting, announcing a “deliberate withdrawal” from Manbij and northeast Syria, confirming “We are out of Manbij”.

This will of course make it impossible for pro-Turkish forces to take the town, and it’s likely that Erdogan may have been privy to Russian plans from the start. 

“It is essentially a handover,” the official continued to Newsweek. “However, it’s a quick out, not something that will include walk-throughs, etc., everything is about making out with as much as possible of our things while destroying any sensitive equipment that cannot be moved.”

Local footage aired by RT showed the unprecedented moment a retreating column of US forces from Manbij passed a truck full of Syrian Army troops, headed the opposite direction. 

US forces had helped its SDF partner force administer Manbij since liberating the mixed majority-Arab town from ISIS in 2016.

It’s remarkable that President Trump has apparently ordered the rapid handover to Russian and Syrian national forces, which is likely to bringer a quicker end to the now over eight-year long war than was expected.

Meanwhile it appears that after five years Raqqa is also now back under Syrian government control.

This just as the White House has authorized sanctions on Turkey over the “destabilizing actions” related to its ‘Operation Peace Spring’ in northeast Syria.


Tyler Durden

Tue, 10/15/2019 – 08:43

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Goldman’s Dismal Quarter: Prop Trading Plunges; IBanking Slides; Average Comp Crashes

Goldman’s Dismal Quarter: Prop Trading Plunges; IBanking Slides; Average Comp Crashes

Moments after JPM officially launched Q3 earnings season with a set of impressive results, which saw FICC and IBanking revenues surge, even as equity trading unexpectedly dropped, it was Goldman’s turn and what it reported was decidedly less pleasant for its shareholders.

Goldman reported Q3 EPS of $4.79, missing the consensus estimate of $4.86, and down a whopping 24% from $6.28 a year ago; meanwhile Goldman appears to have given up on chasing the $10BN revenue per quarter” goal, and in Q3 the bank reported revenue of $8.32BN, down 3.8%, and below the $8.91BN estimate.

A quick look at the non-trading aspect of Goldman’s income statement (yes, now that Goldman is becoming a retail bank, “it’s a thing”), the bank reported net interest income of $1.01 billion in Q3, missing the estimate of $1.04 billion.

However it was the trading aspects of Goldman’s revenue that were the key focus, and it was here that things got ugly:

First the good news: similar to JPMorgan, Goldman reported a modest beat in FICC, while it also showed an improvement in equity sales and trading, to wit:

  • 3Q equities sales & trading revenue $1.88 billion, +4.8% y/y, estimate $1.82 billion
  • 3Q FICC sales & trading revenue $1.41 billion, +7.9% y/y, estimate $1.35 billion

As a result, total 3Q trading revenue rose 6.1% to $3.29 billion, solidly beating the estimate of $3.17 billion.

And now the bad news: here, too, like JPM, Goldman’s Ibanking revenues slumped, tumbling a whopping 15% to $1.69BN from $1.98BN, and missing the estimate of $1.80 billion. As Bloomberg notes, Goldman’s ibankers delivered their worst showing in David Solomon’s tenure as chief executive officer amid choppy markets and marquee deals that failed to come to market.

But the biggest disappointment was also what helped propel Goldman’s revenue higher last quarter, namely its “investing and lending group”, i.e. prop trading, which after reporting $2.5BN in revenue in Q2, tumbled to just $1.68BN in Q3, a whopping 11% drop from a year ago, and the lowest prop trading total since Q4 2017.

Commenting on this sharp drop, Goldman said that net revenues in equity securities were $662 million, 40% lower than the third quarter of 2018, “reflecting significantly lower net gains from investments in private equities as well as net losses from investments in public equities.” Meanwhile, “net revenues in debt securities and loans were $1.02 billion, 10% higher than the third quarter of 2018, driven by significantly higher net interest income. The third quarter of 2019 included net interest income of $891 million.”

Said otherwise, the days when Goldman was Wall Street’s greatest prop trading desk are long behind it and Goldman is now becoming a full-fledged retail bank, which while boosting net interest income, is crushing the bank’s other legacy sources of revenue.

There was more bad news: as Bloomberg notes, the firm took a $267 million markdown on its public equity investments such as Uber, Avantor and Tradeweb Markets, and probably also took a markdown in its stake in WeWork after its IPO collapsed. The losses fueled the worst performance in more than three years for the bank’s equity investments in public and private companies. As Bloomberg adds, “the slump in prized holdings will add to a perception that the investments are subject to unpredictable swings even as the firm works to provide more disclosure.”

And the worst news by far, at least for Goldman’s employees: now that the bank is a shadow of its former Ibanking powerhouse self as it scramble to rediscover itself as a plain vanilla retail bank, average banker compensation plunged, with the bank recording a paltry $2.7BN in compensation benefits in the quarter even as it hired a whopping 2,200 FTE workers this quarter, the most in one quarter since the financial crisis due to timing of campus hires and acquisition of United Capital, and of course, hiring more retail bankers for its Marcus division. As the chart below shows, net of accruals, Goldman’s average employee compensation plunged from $323K to $295K, only the third sub-$300K print this decade and the lowest average comp since the financial crisis.

Meanwhile, with the Fed now cutting rates, it will be interesting to see just how Goldman grows its retail bank and hopes to harvest deposits as it competes with every other banks for retail money, especially after the firm recently cut for the third time the amount of interest it pays depositors with online savings accounts. Good luck to all Goldman retail bankers.


Tyler Durden

Tue, 10/15/2019 – 08:23

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How Far Can The Stock Market Run?

How Far Can The Stock Market Run?

Via Global Macro Monitor,

Very little to the upside.  Very much to the downside.

Macro Valuation Metrics

Lots of incoming over our S&P Shooting Star post, most of which can mostly be summed up to the effect, “Why so bearish?

Seriously?   Our predisposition to the market is always anchored in time tested valuation metrics, which are hard to manipulate.  That is why we like market capitalization deflated by some macro variables, such as nominal GDP or wages.

Micro measures, such as Price-to-Earnings are way too distorted by buybacks and can be easily manipulated by CFOs, who play around with variables such as depreciation or loss reserves.

Our two favorite are  1) market cap-to-GDP,  which, according to Warren Buffet is,  “the best single measure of where valuations stand at any given moment.”   Take a look at the following chart and you will understand why the Oracle of Omaha is sitting on a record $122 billion stockpile of cash,  2) the number of hours of work needed to buy the S&P500, not a perfect valuation measure but does track our other favorite quite well.  The average person, making the average salary is not a big holder of stocks but the metric does give a heads up when the stock market becomes divorced from the underlying economic trend.

Take a look at the data and you decide, folks.   Keep in mind, the charts are ratios, not price indices, and can’t continue to rise from lower left to upper right,  forever.

Turn off the talking heads on bubble vision and #FinTwit, who will find it difficult to interpret the following charts because their salaries and year-end bonuses depend on their not understanding them or are incentivized to dismiss them outright.

Source:  Advisor Perspectives

Run Forest Run

Can markets, once again, convince themselves that historic valuations no longer matter?  Possibly,  but they will need a theme to fuel the delusion.

It could come in the form QE Forever, which we don’t think is very probable.  That jig is almost up and any further rise in inflation will put a stake through its heart.

Artificial Intelligence?   This is the one to watch, which will be a major disruptive force for decades to come.

The theme goes something like this.  Companies can lay off all their workers and replace them with machines and algorithms, which will inflate margins to infinity and beyond.

The problem with this scenario is it would crush aggregate demand and economic growth.  The geniuses are trying to find a balance and, thus far, have come up with concepts such as Universal Basic Income (UBI) and Modern Monetary Theory (MMT).

Stay tuned.

Wake us up after the above charts regress to their means, about 40 percent lower.


Tyler Durden

Tue, 10/15/2019 – 08:05

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University of Louisville Can’t Sue Escort for Exposing Prostitution in the Louisville Basketball Program

From Hornback v. Powell, decided Friday by the Kentucky Court of Appeals:

[Plaintiffs] alleged that Appellee Katina Powell claimed that she and her daughters engaged in or agreed to engage in sexual conduct with University of Louisville men’s basketball players and recruits from 2010 to 2014 in exchange for a fee of $10,000 paid by a University of Louisville employee. This claim was memorialized in a book called Breaking Cardinal Rules: Basketball and the Escort Queen…. According to the record, Powell’s claims resulted in the University of Louisville self-imposing a postseason ban on its men’s basketball program for the 2015-16 season….

[1. Plaintiffs] first assert that KRS Chapter 529 and KRS 446.070 may be applied in unison to sustain a cause of action against [Defendants (Powell, her coauthors, and her publisher)]. KRS Chapter 529 addresses prostitution offenses, and [Plaintiffs] direct our attention to case law holding that one of the purposes of prostitution statutes is to protect the public health and welfare. KRS 446.070 states that a “person injured by the violation of any statute may recover from the offender such damages as he sustained by reason of the violation[.]” [Plaintiffs] argue that they are “within the class intended to be protected by the statute” (meaning KRS chapter 529), that prostitution and profiting therefrom is unlawful, and that KRS 446.070 may be applied to allow their recovery from [Defendants] for damages sustained by reason of the violation….

[But Plaintiffs] have not demonstrated that Powell or others were charged with or convicted of KRS Chapter 529 violations. Even if [Plaintiffs] had provided such proof, [Plaintiffs] are at best remote and unconnected third parties who cannot reasonably be characterized as being injured or damaged by Powell’s alleged unlawful conduct….

[2. Plaintiffs also cite the Kentucky “Son of Sam” law,] which states: “Every person contracting with any person or the representative or assignee of any person accused or convicted of a crime in this state, with respect to the reenactment of such crime, by way of a movie, book, magazine article, radio, or television presentation, live entertainment of any kind, or from the expression of such person’s thoughts, feelings, opinions, or emotions regarding such crime, shall pay over to the Kentucky Claims Commission any moneys which would otherwise, by terms of such contract, be owing to the person so accused or convicted or his representatives.”

[Plaintiffs] argue that Powell [and other defendants] conspired to profit from prostitution via the book Breaking Cardinal Rules and assert that the [Plaintiffs] are victims for purposes of this statutory provision…. [But Plaintiffs again] provide no citation to the record demonstrating that Powell was “accused or convicted of a crime in this state ….” Further, KRS Chapter 346 and the plain language of KRS 49.450(1) allows for the recovery of proceeds by the Kentucky Claims Commission, not by purported victims. And finally, [Plaintiffs] cannot demonstrate that they are “victims” of [Defendants’] conduct in any meaningful sense….

[3. Plaintiffs] go on to argue … that they may prosecute a claim against [Defendants] for “tortious interference with a prospective business advantage.”  …. [Plaintiffs] contend that they were prepared to offer evidence of the diminution in value of their University of Louisville degrees resulting from [Defendants’] actions, as well as the testimony of a psychologist who was expected to state that [Plaintiffs] suffered depression, anxiety, stress, and ridicule.

[Plaintiffs] allege that when wearing University of Louisville logos and attire in public places, they are approached by strangers who make rude and hateful remarks because of the events chronicled in the book…. [But] they cannot demonstrate that [Defendants] committed an intentional act of interference with respect to that business relationship, nor that [Defendants’] actions caused damages. In order to sustain a claim of tortious interference with a prospective business advantage, [Plaintiffs] must offer “evidence of a motive or intent … to interfere” with the business relationship. [Plaintiffs] cannot demonstrate that Powell’s alleged sexual contact with University of Louisville basketball players and recruits was motivated by an intent to interfere with a business relationship between remote third-party students and the University. Rather, the only motivator cited by [Plaintiffs] was Powell’s desire to be financially compensated. [Plaintiffs’] claim on this issue must fail as a matter of law, and we find no error.

[4. Plaintiffs also argue that Defendants’] actions constituted intentional infliction of emotional distress sufficient to sustain a claim for damages…. [But w]hile [Plaintiffs] contend that strangers ridicule them when they are wearing University of Louisville logos on their clothing, they do not allege the degree of severe emotional distress necessary to sustain the cause of action. Further, this tort “requires conduct intended to cause emotional distress in the victim.”  No allegation has been forwarded, nor could it be demonstrated under the facts before us, that [Defendants] intended to cause severe emotional distress in the [Plaintiffs]….

I haven’t followed the underlying controversy, but here’s an excerpt from the NCAA report:

A member of the men’s basketball staff arranged on-campus striptease dances and acts of prostitution for enrolled student-athletes and prospective student-athletes (prospects), some of whom were minors, on their campus visits. The conduct occurred in an institutional dormitory predominantly occupied by the men’s basketball team and others affiliated with the program. For approximately three and one-half years, the former director of men’s basketball operations arranged with a local escort to bring female strippers and prostitutes to Minardi Hall on nights prospects were staying there. The women performed striptease dances for the prospects and, occasionally, enrolled student-athletes. On 10 occasions, one or more of the prostitutes performed sex acts on and/or with prospects, an enrolled studentathlete and a prospect’s friend. At leastseven of the prospects who engaged in sex acts were minors under age 18 at the time. On two occasions, the former director of men’s basketball operations arranged, through the escort, for prostitutes to have sex at local hotels with the nonscholastic basketball coaches of two prospects being recruited by the institution.

But was the fix in? One of the judges on the panel has two degrees from Kentucky, another has one, and none have any from Louisville. Coincidence?

(Well, OK, the trial judge did go to Louisville for law school, and he ruled the same way as the appellate judges did.)

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University of Louisville Can’t Sue Escort for Exposing Prostitution in the Louisville Basketball Program

From Hornback v. Powell, decided Friday by the Kentucky Court of Appeals:

[Plaintiffs] alleged that Appellee Katina Powell claimed that she and her daughters engaged in or agreed to engage in sexual conduct with University of Louisville men’s basketball players and recruits from 2010 to 2014 in exchange for a fee of $10,000 paid by a University of Louisville employee. This claim was memorialized in a book called Breaking Cardinal Rules: Basketball and the Escort Queen…. According to the record, Powell’s claims resulted in the University of Louisville self-imposing a postseason ban on its men’s basketball program for the 2015-16 season….

[1. Plaintiffs] first assert that KRS Chapter 529 and KRS 446.070 may be applied in unison to sustain a cause of action against [Defendants (Powell, her coauthors, and her publisher)]. KRS Chapter 529 addresses prostitution offenses, and [Plaintiffs] direct our attention to case law holding that one of the purposes of prostitution statutes is to protect the public health and welfare. KRS 446.070 states that a “person injured by the violation of any statute may recover from the offender such damages as he sustained by reason of the violation[.]” [Plaintiffs] argue that they are “within the class intended to be protected by the statute” (meaning KRS chapter 529), that prostitution and profiting therefrom is unlawful, and that KRS 446.070 may be applied to allow their recovery from [Defendants] for damages sustained by reason of the violation….

[But Plaintiffs] have not demonstrated that Powell or others were charged with or convicted of KRS Chapter 529 violations. Even if [Plaintiffs] had provided such proof, [Plaintiffs] are at best remote and unconnected third parties who cannot reasonably be characterized as being injured or damaged by Powell’s alleged unlawful conduct….

[2. Plaintiffs also cite the Kentucky “Son of Sam” law,] which states: “Every person contracting with any person or the representative or assignee of any person accused or convicted of a crime in this state, with respect to the reenactment of such crime, by way of a movie, book, magazine article, radio, or television presentation, live entertainment of any kind, or from the expression of such person’s thoughts, feelings, opinions, or emotions regarding such crime, shall pay over to the Kentucky Claims Commission any moneys which would otherwise, by terms of such contract, be owing to the person so accused or convicted or his representatives.”

[Plaintiffs] argue that Powell [and other defendants] conspired to profit from prostitution via the book Breaking Cardinal Rules and assert that the [Plaintiffs] are victims for purposes of this statutory provision…. [But Plaintiffs again] provide no citation to the record demonstrating that Powell was “accused or convicted of a crime in this state ….” Further, KRS Chapter 346 and the plain language of KRS 49.450(1) allows for the recovery of proceeds by the Kentucky Claims Commission, not by purported victims. And finally, [Plaintiffs] cannot demonstrate that they are “victims” of [Defendants’] conduct in any meaningful sense….

[3. Plaintiffs] go on to argue … that they may prosecute a claim against [Defendants] for “tortious interference with a prospective business advantage.”  …. [Plaintiffs] contend that they were prepared to offer evidence of the diminution in value of their University of Louisville degrees resulting from [Defendants’] actions, as well as the testimony of a psychologist who was expected to state that [Plaintiffs] suffered depression, anxiety, stress, and ridicule.

[Plaintiffs] allege that when wearing University of Louisville logos and attire in public places, they are approached by strangers who make rude and hateful remarks because of the events chronicled in the book…. [But] they cannot demonstrate that [Defendants] committed an intentional act of interference with respect to that business relationship, nor that [Defendants’] actions caused damages. In order to sustain a claim of tortious interference with a prospective business advantage, [Plaintiffs] must offer “evidence of a motive or intent … to interfere” with the business relationship. [Plaintiffs] cannot demonstrate that Powell’s alleged sexual contact with University of Louisville basketball players and recruits was motivated by an intent to interfere with a business relationship between remote third-party students and the University. Rather, the only motivator cited by [Plaintiffs] was Powell’s desire to be financially compensated. [Plaintiffs’] claim on this issue must fail as a matter of law, and we find no error.

[4. Plaintiffs also argue that Defendants’] actions constituted intentional infliction of emotional distress sufficient to sustain a claim for damages…. [But w]hile [Plaintiffs] contend that strangers ridicule them when they are wearing University of Louisville logos on their clothing, they do not allege the degree of severe emotional distress necessary to sustain the cause of action. Further, this tort “requires conduct intended to cause emotional distress in the victim.”  No allegation has been forwarded, nor could it be demonstrated under the facts before us, that [Defendants] intended to cause severe emotional distress in the [Plaintiffs]….

I haven’t followed the underlying controversy, but here’s an excerpt from the NCAA report:

A member of the men’s basketball staff arranged on-campus striptease dances and acts of prostitution for enrolled student-athletes and prospective student-athletes (prospects), some of whom were minors, on their campus visits. The conduct occurred in an institutional dormitory predominantly occupied by the men’s basketball team and others affiliated with the program. For approximately three and one-half years, the former director of men’s basketball operations arranged with a local escort to bring female strippers and prostitutes to Minardi Hall on nights prospects were staying there. The women performed striptease dances for the prospects and, occasionally, enrolled student-athletes. On 10 occasions, one or more of the prostitutes performed sex acts on and/or with prospects, an enrolled studentathlete and a prospect’s friend. At leastseven of the prospects who engaged in sex acts were minors under age 18 at the time. On two occasions, the former director of men’s basketball operations arranged, through the escort, for prostitutes to have sex at local hotels with the nonscholastic basketball coaches of two prospects being recruited by the institution.

But was the fix in? One of the judges on the panel has two degrees from Kentucky, another has one, and none have any from Louisville. Coincidence?

(Well, OK, the trial judge did go to Louisville for law school, and he ruled the same way as the appellate judges did.)

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JPMorgan Jumps On FICC Revenue Surge, IBanking Beat Even, But Dimon Sees “Weakening Business Sentiment”

JPMorgan Jumps On FICC Revenue Surge, IBanking Beat Even, But Dimon Sees “Weakening Business Sentiment”

Ahead of today’s barrage of bank earnings reports, there was some concerns that between tumbling 10Y yields and a sharp drop in trading this quarter, the two main sources of bank income would be clogged and financial stocks would disappoint. And while that may yet happen, the first company to report, JPMorgan, is higher in the premarket after beating on both the top and bottom line.

The largest US bank reported Q3 revenue of $29.3BN and manged revenue of $30.1BN, up 8.1% or $2.2 compared to a year ago, both beating consensus expectations of $28.47BN, with earnings rising 34 cents to $2.68, also higher than the $2.51 expected. To get here, JPM reported that its effective tax rate was 20.4%, while its managed rate was 25.1%.

JPM’s closely watched net interest income – a key variable in a time of inverted yield curves – managed to rise 2.3% to $14.23BN from $14.17BN, coming above the highest analyst estimate of $14.20BN. According to Bloomberg, net interest income was up 2% from a year ago, thanks to growing balance sheet and changing mix of assets as declining interest rates bring down margins. As expected, NII growth has collapsed this year for all banks as the Federal Reserve started cutting interest rates. The Q3 net yield on interest-earning assets was 2.41% vs. 2.51% y/y and down feom 2.49% in the prior quarter, in line with the 2.41% estimate.

Not surprisingly, Jamie Dimon mentioned the rate environment in his quote: “JPMorgan Chase delivered record revenue this quarter, demonstrating broad-based strength and the resilience of our business model despite a more challenging interest rate backdrop.”

Yet against this “challenging interest rate backdrop,” Dimon noted the bank’s “consumer lending businesses benefited from our continued investments and a favorable environment for borrowers, which helped drive healthy volumes in Home Lending and Auto and strong loan growth in Card.” Dimon also cited record investment banking fees, and said JPMorgan had “share gains across products and regions.”

Meanwhile, after several quarters of cost-cutting, JPM reported that its total expense rose by $800MM Y/Y to $16.4BN as the period of shrinking for the largest US bank appears to be over.

Next, focusing on JPM’s Corporate and Investment Bank, it is here that the bank surprise with an impressive FICC revenue print, which rose a whopping 25% Y/Y to $3.56BN, up $713MM compared to the year ago quarter “which reflected less favorable market conditions.”

At the same time, JPM reported Equity Markets revenue of $1.52BN, missing expectations of $1.66BN and down 5% compared to a strong prior year, “reflecting lower revenues in derivatives, partially offset by higher Cash Equities.”

As Bloomberg puts it, while in the first half of the year, equities were doing better for most big banks and fixed income was lagging, volatility in the past quarter seems to have helped FICC revenue, while depressing equity trading.

Investment Banking also beat, rising 8% to $1.87BN from $1.80BN a year ago, mostly from higher debt and equity underwriting fees. Still, JPM faced lower advisory fees, which was expected in light of the sharp drop in M&A in the quarter.

So a somewhat mixed picture: fixed income up 25%, but equity trading down 5%, which prompted JPMorgan to flag the point that Jamie Dimon brought up in September, namely the prior-year quarter was fairly weak, so the comparison for fixed income makes this quarter’s look a bit stronger than normal.

Offsetting the higher revenue was a 3% increase in expenses, which rose to $5.3B, up 3% YoY, driven by higher volume- and revenue-related expenses and investments, largely offset by lower legal expense and FDIC charges.

Finally, there was an interesting bullet on the IB page with JPM noting that credit costs of $92mm, were “largely driven by reserve builds on select emerging market client downgrades.” One wonders what exactly JPM means by this.

Looking ahead, JPM made the following forecasts:

  • Expect FY2019 net interest income of <$57.5B, market dependent
  • Expect FY2019 adjusted expense of ~$65.5B
  • Expect FY2019 net charge-offs of ~$5.5B

Commenting on the broader economy, Dimon turned decidedly gloomy, mentioning trade tensions and geopolitical worries:

“In the U.S. economy, GDP growth has slowed slightly. The consumer remains healthy with growth in wages and spending, combined with strong balance sheets and low unemployment levels. This is being offset by weakening business sentiment and capital expenditures mostly driven by increasingly complex geopolitical risks, including tensions in global trade. Regardless of the operating environment, JPMorgan Chase will continue to serve our customers, clients and communities globally, while investing in innovation, talent, technology, security and controls.”

Validating Dimon’s gloomy call on the economy, JPM’s provisions in the consumer and community banking businesses climbed 34%. Within the card business, net charge-offs were higher but the bank says that was in line with expectations and partially due to a reserve build as “newer vintages season.” It will be curious what JPM says on this topic even though Dimon said the consumer “remains healthy.”

One final note: there was no mention of WeWork in JPMorgan’s press release or presentation. Overnight, WeWork was said to have preferred JPMorgan over Softbank for its financing package.

Following the strong FICC and IB beat, the stock jumped as much as 2% premarket, rising to $119 a share, just over a dollar away from the all time high of $120.40.


Tyler Durden

Tue, 10/15/2019 – 07:41

via ZeroHedge News https://ift.tt/2BbksH5 Tyler Durden