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Just a day after Goldman COO Gary Cohn unexpectedly met with Donald Trump, he is now said to be “weighing a future outside the firm” the WSJ reports. According to Dow Jones, the bank’s “Number 2”, who met with Trump on Tursday, has had conversations in recent months about leaving the bank.

As reported yesterday, Cohn, who has been CEO Blankfein’s top deputy for a decade, met with Donald Trump Tuesday. It isn’t clear whether the president-elect is considering Mr. Cohn for a position; Politico reported Wednesday that Mr. Cohn could be a contender to head the Office of Management and Budget. A possible position in the Trump administration comes at a time when Mr. Cohn’s role at Goldman has already been in question. The 56-year-old president and chief operating officer has had conversations in recent months about leaving the bank, according to people familiar with the matter.

As second-in-command, Mr. Cohn oversees Goldman’s daily operations. He joined Goldman in 1990 and became a partner in 1994—a class that also included Mr. Trump’s nominee for Treasury Secretary, Steven Mnuchin.

 

Mr. Cohn’s background reflects the sort of Midwestern voters who helped power Mr. Trump to a surprise victory. Born in Ohio the son of an electrician, Mr. Cohn’s first job was selling window frames and aluminum siding in Cleveland, and he later sold silver on Wall Street.

 

In recent years, he has taken on a more public-facing role and struck clients and colleagues as more polished. He has cultivated relationships in Silicon Valley, where Mr. Blankfein is less at ease, and is close to executives such as Uber Technologies Inc.’s Travis Kalanick and Tesla Motors Inc.’s Elon Musk.

A departure by the bank’s president would scrap Goldman’s most-obvious succession plan, and in the process elevate a new crop of executives eyeing Blankfein’s job the WSJ notes. It would also signal that Mr. Blankfein, who weathered the financial crisis, survived a bout with cancer and has settled into a role as a senior industry statesman, isn’t going anywhere.

The paper adds that Blankfein’s stay has become more accepted within Goldman’s executive ranks in recent months. Michael Sherwood, who ran Goldman’s international business from London and had once been seen as a potential successor, said as much last week when he announced his retirement. “Some people want [the CEO job] passionately; I just didn’t,” Mr. Sherwood said in an interview. “One of those people, by the way, is named Lloyd and he’s not going anywhere. He doesn’t say ‘one more year;’ he says ‘five more years.”

Blankfein has been CEO since 2006, and his inner circle of confidants has seen little turnover, leaving few opportunities for promotion lower down the ranks. That has meant that there is little room for Cohn and created what some executives describe as a talent bottleneck. Further, some executives describe growing frustration with the stasis, even while acknowledging that steady leadership likely helped Goldman weather the crisis and rally support for strategic changes.

* * * 

Should Mr. Cohn opt to seek opportunities outside the firm, his role as chief operating officer and president would likely be split between among two executives, people familiar with the matter have said. Goldman has a history of co-executives, and Mr. Cohn split the No. 2 job for several years with Jon Winkelried, who left the firm in 2009.

The likeliest candidates to replace Mr. Cohn, according to people familiar with the matter, are Chief Financial Officer Harvey Schwartz and investment-banking co-chief David Solomon. Outside candidates include R. Martin Chavez, Goldman’s chief technologist, and Stephen Scherr, the strategist who was recently put in charge of Goldman’s push into consumer banking.

Who is tapped will say much about how dramatically the regulatory changes pushed through since the crisis have reshaped Goldman’s priorities and power centers.

As to where Cohn heads next, should he indeed depart Goldman, it is unclear, although considering his recent visit to Trump Tower, a position in the new administration is likely in the cards. Considering another former Goldman Partner is set to advise Trump, that would no longer be all that shocking.

via http://ift.tt/2fM9AlV Tyler Durden

Just a day after Goldman COO Gary Cohn unexpectedly met with Donald Trump, he is now said to be “weighing a future outside the firm” the WSJ reports. According to Dow Jones, the bank’s “Number 2”, who met with Trump on Tursday, has had conversations in recent months about leaving the bank.

As reported yesterday, Cohn, who has been CEO Blankfein’s top deputy for a decade, met with Donald Trump Tuesday. It isn’t clear whether the president-elect is considering Mr. Cohn for a position; Politico reported Wednesday that Mr. Cohn could be a contender to head the Office of Management and Budget. A possible position in the Trump administration comes at a time when Mr. Cohn’s role at Goldman has already been in question. The 56-year-old president and chief operating officer has had conversations in recent months about leaving the bank, according to people familiar with the matter.

As second-in-command, Mr. Cohn oversees Goldman’s daily operations. He joined Goldman in 1990 and became a partner in 1994—a class that also included Mr. Trump’s nominee for Treasury Secretary, Steven Mnuchin.

 

Mr. Cohn’s background reflects the sort of Midwestern voters who helped power Mr. Trump to a surprise victory. Born in Ohio the son of an electrician, Mr. Cohn’s first job was selling window frames and aluminum siding in Cleveland, and he later sold silver on Wall Street.

 

In recent years, he has taken on a more public-facing role and struck clients and colleagues as more polished. He has cultivated relationships in Silicon Valley, where Mr. Blankfein is less at ease, and is close to executives such as Uber Technologies Inc.’s Travis Kalanick and Tesla Motors Inc.’s Elon Musk.

A departure by the bank’s president would scrap Goldman’s most-obvious succession plan, and in the process elevate a new crop of executives eyeing Blankfein’s job the WSJ notes. It would also signal that Mr. Blankfein, who weathered the financial crisis, survived a bout with cancer and has settled into a role as a senior industry statesman, isn’t going anywhere.

The paper adds that Blankfein’s stay has become more accepted within Goldman’s executive ranks in recent months. Michael Sherwood, who ran Goldman’s international business from London and had once been seen as a potential successor, said as much last week when he announced his retirement. “Some people want [the CEO job] passionately; I just didn’t,” Mr. Sherwood said in an interview. “One of those people, by the way, is named Lloyd and he’s not going anywhere. He doesn’t say ‘one more year;’ he says ‘five more years.”

Blankfein has been CEO since 2006, and his inner circle of confidants has seen little turnover, leaving few opportunities for promotion lower down the ranks. That has meant that there is little room for Cohn and created what some executives describe as a talent bottleneck. Further, some executives describe growing frustration with the stasis, even while acknowledging that steady leadership likely helped Goldman weather the crisis and rally support for strategic changes.

* * * 

Should Mr. Cohn opt to seek opportunities outside the firm, his role as chief operating officer and president would likely be split between among two executives, people familiar with the matter have said. Goldman has a history of co-executives, and Mr. Cohn split the No. 2 job for several years with Jon Winkelried, who left the firm in 2009.

The likeliest candidates to replace Mr. Cohn, according to people familiar with the matter, are Chief Financial Officer Harvey Schwartz and investment-banking co-chief David Solomon. Outside candidates include R. Martin Chavez, Goldman’s chief technologist, and Stephen Scherr, the strategist who was recently put in charge of Goldman’s push into consumer banking.

Who is tapped will say much about how dramatically the regulatory changes pushed through since the crisis have reshaped Goldman’s priorities and power centers.

As to where Cohn heads next, should he indeed depart Goldman, it is unclear, although considering his recent visit to Trump Tower, a position in the new administration is likely in the cards. Considering another former Goldman Partner is set to advise Trump, that would no longer be all that shocking.

via http://ift.tt/2fM9AlV Tyler Durden

By EconMatters

We discuss where Oil is headed over the next six months and how producers might want to buy back their hedges before they start losing money big time above $54 a barrel. Producers could lose big on all those hedges they thought were their friend in the oil market!

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Today’s “OPEC deal” snowjob continued with the statement by Russian energy minister Novak, who moments ago have a press conference in which he praised the production cut conclusion, however, two key aspects of Russia’s contribution to the non-OPEC stood out.

First, the energy minister said that Russia would cut production “only gradually because of technical issues”, and he also refused to note from what level Russia production will be cut. The last is important, because in the past week Russia hinted that instead of actually cutting from a historical reference level, it would “cut” from a level proposed in its 2017 budget, all of which are higher than the October, or November, levels.

Here is the Reuters summary of Novak headlines

• RUSSIAN ENERGY MINISTER NOVAK SAYS WELCOMES OPEC DECISION
• NOVAK SAYS OPEC OIL DEAL IS MAJOR STEP FOR GLOBAL CRUDE INDUSTRY, AIMED AT RESTORING SUPPLY/DEMAND BALANCE
• NOVAK SAYS RUSSIA READY TO JOIN AGREEMENT ON OIL PRICE STABILIZATION
• NOVAK SAYS RUSSIA READY TO GRADUALLY CUT OIL OUTPUT BY UP TO 300,000 BPD IN H1 2017
• NOVAK SAYS RUSSIA WILL CUT PRODUCTION ONLY GRADUALLY BECAUSE OF TECHNICAL ISSUES
• NOVAK SAYS RUSSIA EXPECTS OTHER NON-OPEC COUNTRIES TO CUT OUTPUT BY UP TO 300,000 BPD
• NOVAK SAYS OPEC, NON-OPEC COUNTRIES AGREED TO MEET WITHIN 10 DAYS
• NOVAK SAYS OPEC, NON-OPEC DEAL TO BE STATED IN OIL PRODUCERS’ SPECIAL MEMORANDUM
• NOVAK GIVES NO INDICATION FROM WHICH LEVEL RUSSIA IS READY TO CUT OUTPUT.

A quick skim of these reveals that Russia has little if any intention of actually cutting production, and certainly not at once, and instead – alongside all other Non-OPEC members – will seek to capture market share from those OPEC nations, mostly Saudi Arabia, who have cut production.

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Shortly after the conclusion of today’s Vienna meeting, OPEC released the following table which lays out the breakdown of what the current reference production level is by nation, as well as the proposed adjustment to get to a 1.2 million barrel per day reduction, as well as the “pro forma” production number that will be effective on January 2017.

Two quick observations.

As noted previously, Indonesia is no longer in OPEC after it “suspended” its membership, effectively giving it full right to pump as much as it wants relative to its most recent October baseline production level of 722K per the OPEC monthly book. The reason for Indonesia’s departure, according to the Nigeria oil minister, is that it was “unable to contribute a large enough cut.”

More notably, Iran was in such a rush to declare victory and state that it is the only nation to be allowed to boost production that someone forgot to check the math in the table, because the 90,000 upward adjustment appears to be an error: the country’s Reference Production level of 3,975tb/d is actually well higher than the January production level of 3,797tb/d. However, for political and optical purposes, it was meant to give Iran a domestic “victory” over the Saudis, by giving Iran leeway to announce it was the only nation to be allowed to boost production in the face of Saudi opposition, when in reality it appears to have been a math glitch.

However, even more notable is that if one compares the OPEC production level per the “deal” relative to January output, is that total production appears to be higher by over 800,000 barrels. Keep in mind that both Libya and Nigeria are set to boost production higher, potentially to 1mmb/d and 2mm/d respectively, and expanding total OPEC production back over 33mmbpd in just a few months. This happens at a time of modest seasonal production reduction by the Saudis and modest cuts by other members, while the exempt nations are ramping up.

One wonders how long until the market does this math and realizes that basically the strategy since February was to jawbone prices higher, ramp up throughout and then adjust to seasonal levels in January 2017 and call it a cut?

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The latest just released Quarterly Report on Household Debt and Credit  from the New York Fed showed a small increase in overall debt in the third quarter of 2016, prompted by gains in non-housing debt, and new all time highs in student loans which hit $1.279 trillion, rising $20 billion in the quarter.11.0% of aggregate student loan debt was 90+ days delinquent or in default at the end of 2016 Q3.

Total household debt rose $63 billion in the quarter to $12.35 trillion, driven by a $32 billion increase in auto loans, which also hit a record high of $1.14 trillion. 3.6% of auto loans were 90 or more days delinquent.

Mortgage balances continued to grow at a sluggish pace since the recession while auto loan balances are growing steadily, and hit a new all time high of $1.14 trillion.

What was most troubling, however, is that delinquencies for auto loans increased in the third quarter, and new subprime auto loan delinquencies have not hit the highest level in 6 years.

The rise in auto loans, a topic closely followed here, has been fueled by high levels of originations across the spectrum of creditworthiness, including subprime loans, which are disproportionately originated by auto finance companies. Disaggregating delinquency rates by credit score reveals signs of distress for loans issued to subprime borrowers—those with a credit score under 620.

To address the troubling surge in auto loan delinquencies, the NY Fed Liberty Street Economics blog posted an analysis of the latest developments in the sector. This is what it found.

Subprime Auto Debt Grows Despite Rising Delinquencies

The rise in auto loans has been fueled by high levels of originations across the spectrum of creditworthiness, including subprime loans, which are disproportionately originated by auto finance companies. Disaggregating delinquency rates by credit score reveals signs of distress for loans issued to subprime borrowers—those with a credit score under 620. In this post we take a deeper dive into the observed growth in auto loan originations and delinquencies. This analysis and our Quarterly Report are based on the New York Fed’s Consumer Credit Panel, a data set drawn from Equifax credit reports.

Originations of auto loans have continued at a brisk pace over the past few years, with 2016 shaping up to be the strongest of any year in our data, which begin in 1999. The chart below shows total auto loan originations broken out by credit score. The dollar volume of originations has been high for all groups of borrowers this year, with the quarterly levels of originations only just shy of the highs reached in 2005. The overall composition of both originations and outstanding balances has been stable.

As we noted in an earlier blog post, one feature of our data set is that it enables us to infer whether auto loans were made by a bank or credit union, or by an auto finance company. The latter are typically made through a car manufacturer or dealer using Equifax’s lender classification. Although it remains true that banks and credit unions comprise about half of the overall outstanding balance of newly originated loans, the vast majority of subprime loans are originated by auto finance companies. The chart below disaggregates the $1.135 trillion of outstanding auto loans by credit score and lender type, and we see that 75 percent of the outstanding subprime loans were originated by finance companies.Auto

In the chart below, auto loan balances broken out by credit score reveal that balances associated with the most creditworthy borrowers—those with a score above 760 (in gray below)—have steadily increased, even through the Great Recession. Meanwhile, the balances of the subprime borrowers (in light blue below), contracted sharply during the recession and then began growing in 2011, surpassing their pre-recession peak in 2015.

Delinquency Rates

Auto loan delinquency data, reported in our Quarterly Report, show that the overall ninety-plus day delinquency rate for auto loans increased only slightly in 2016 through the end of September to 3.6 percent. But the relatively stable delinquency rate masks diverging performance trends across the two types of lenders. Specifically, a worsening performance among auto loans issued by auto finance companies is masked by improvements in the delinquency rates of auto loans issued by banks and credit unions. The ninety-plus day delinquency rate for auto finance company loans worsened by a full percentage point over the past four quarters, while delinquency rates for bank and credit union auto loans have improved slightly. An even sharper divergence appears in the new flow into delinquency for loans broken out by the borrower’s credit score at origination, shown in the chart below. The worsening in the delinquency rate of subprime auto loans is pronounced, with a notable increase during the past few years.

It’s worth noting that the majority of auto loans are still performing well—it’s the subprime loans that heavily influence the delinquency rates. Consequently, auto finance companies that specialize in subprime lending, as well as some banks with higher subprime exposure are likely to have experienced declining performance in their auto loan portfolios.

Conclusion

The data suggest some notable deterioration in the performance of subprime auto loans. This translates into a large number of households, with roughly six million individuals at least ninety days late on their auto loan payments. Even though the balances of subprime loans are somewhat smaller on average, the increased level of distress associated with subprime loan delinquencies is of significant concern, and likely to have ongoing consequences for affected households.

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After what many described as a long-shot effort by Democratic representative Tim Ryan of Ohio to unseat Nancy Pelosi as House minority leader, the results of the Democrat secret ballots are in and reveal that, indeed, he fell well short. 

Pelosi wins! 134-63

— John Bresnahan (@BresPolitico) November 30, 2016

 

Of course, Ryan launched his bid to unseat Pelosi based largely on the premise that Rust Belt voters in the Midwest abandoned the democratic party in 2016 precisely because of the elitism exhibited by the San Francisco liberal.  While Pelosi is well known for her ability to raise substantial amounts of cash for the democratic party, $141 million in the past cycle alone according to The Hill, Ryan has argued that electing a House leader with a broader appeal is far more important.

While Ryan likely drew support from a host of young House democrats who have been prevented from rising up the leadership ranks by a stagnant group of Pelosi loyalists, clearly it wasn’t enough to tip the scales in his favor.

Well, House democrats passed her now we’ll wait and see if they like her.

 

* * *

Here is more background on the contest for House minority leader that we posted yesterday.

Democratic representative Tim Ryan of Ohio is a long shot to unseat Nancy Pelosi in the vote for the minority leadership position to be held tomorrow, but he’s convinced that “a lot of people are going to be surprised” by the vote tallies.

“I think a lot of people are going to be surprised tomorrow.”

 

“I think we need a change.  Again, we’re at the smallest number we’ve had in our Democratic caucus since 1929.”

 

“We really got to ask ourselves when we walk out of the room tomorrow, what are we going to tell the American people?  That what happened on Tuesday and what we’ve not been able to do since 2010 is ok?  We’re gonna keep going down the same path.  Or, will we have a new messenger, a new message, a new brand and a new democratic party?”

“A lot of people are going to be surprised tomorrow,” @TimRyan says of leadership fight. https://t.co/1m6zI8b3Oc https://t.co/INedqJs1oE

— New Day (@NewDay) November 29, 2016

 

Ryan has launched a bid to unseat Pelosi based largely on the premise that Rust Belt voters in the Midwest have abandoned the democratic party precisely because of the elitism exhibited the San Francisco liberal.  While Pelosi is known for her ability to raise substantial amounts of cash for the democratic party, $141 million in the past cycle alone according to The Hill, Ryan argues that electing a House leader with a broader appeal is far more important.

Ryan’s challenge hinges largely on the argument that Pelosi, a San Francisco liberal widely despised in conservative circles, simply projects the wrong image for a party hoping to broaden its appeal to the Rust Belt voters who flocked to Trump.

 

“We have got to have the right messenger,” he said. “We have got to have someone who cannot just go on MSNBC, but go on Fox and Fox Business and CNBC and go into union halls and fish fries and churches all over the country and start a brush fire about what a new Democratic Party looks like.”

 

Leader Pelosi is an incredibly strong fundraiser, she’s an incredibly dynamic leader, she gets out there and gets the caucus to do things together that most other leaders would have a very hard time doing. But that’s come at an expense,” a former Democratic leadership aide said Monday.

 

Pelosi also has a huge advantage when it comes to fundraising, having hauled in more than $141 million for the party this cycle alone, according to her office. Ryan, by contrast, raised less than $1 million — far less than the average member, according to the Center for Responsive Politics.

 

Of course, some democrats apparently learned absolutely nothing from the 2016 presidential election and still insist that Pelosi’s fundraising efforts are critical to the future of the party.  But as Tim Ryan points out “if money was the answer, Hillary Clinton would be president and
we would be in charge of the House of Representatives right now.”

“The most important messenger in American politics is money, and the ability to get on the air, get on social media, get on media that are relevant to voters is really expensive, and she has done a phenomenal job at giving us that opportunity,” the former lawmaker said Monday. “I don’t think there’s anyone who can come close to matching what she has done.”

 

Ryan has rejected that argument, saying the focus on campaign cash is misguided.

Meanwhile, Ryan has also drawn support from a host of young House democrats who have been prevented from rising up the leadership ranks by a stagnant group of Pelosi loyalists.

The elections have also heightened long-standing aggravations among newer members that the long reign of Pelosi and her top deputies — all of whom are in their mid-70s — has prevented other members from rising through the leadership ranks.

 

“There’s a generation of Democratic leaders who have been stymied or held down or even cut off at the knees to keep her and [Maryland Rep. Steny] Hoyer and others in power,” the former aide added.

 

“So you have a number of members who look at the agendas and question why, when the country is worried about the economy and jobs, the Democrats are out talking about women power and some of the core liberal issues that aren’t going to play well in the places that Democrats have to win if they’re going to take back the majority.”

Certainly, if the democrats learned anything from the 2016 presidential election they would understand that it represented a rebellion of the American people against establishment political figures like Nancy Pelosi.  That said, somehow we suspect the message hasn’t quite sunk in yet.

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