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The case for buying commodities as an inflation hedge

Posted on 18 November 2013 by VRS  |  Email |Print

If you are worried about inflation, then it makes sense to look at investments that have historically performed well during periods of inflation. In a book called “Defying the Market,” authors Stephen Leeb and Donna Leeb research how well investments, including stocks, real estate and commodities, held their value during the 1970s when the CPI averaged a nominal rate of 8%.
A key factor for this increase has to do with negative real interest rates. Whenever a country has negative real rates, meaning the inflationary rate (CPI) is greater than the current interest rate, gold tends to rise in that country’s currency as investors seek a better store of value………………………………………..Full Article: Source

Commodities revenue at top 10 banks seen dropping 14pct this year

Posted on 15 November 2013 by VRS  |  Email |Print

Commodities revenue at Goldman Sachs Group Inc., Morgan Stanley (MS) and the other companies making up the 10 largest investment banks will fall 14 percent this year, according to analytics company Coalition Ltd.
Revenue will drop to $4.7 billion from $5.5 billion in 2012, Coalition said today in a report. In 2013’s first nine months, commodities revenue at the banks slid 18 percent from a year earlier to $4 billion, the report showed………………………………………..Full Article: Source

Barclays says total commodity AUM falls $10 bln in September

Posted on 07 November 2013 by VRS  |  Email |Print

Total global commodity assets under management (AUM) fell $10 billion to $343 billion in September from August, Barclays Capital said in a research note on Wednesday. Price declines offset a small net inflow of assets in September, Barclays said.
“Nevertheless, in terms of attracting fresh investments, third quarter was the best quarter for commodities since fourth quarter of 2012.”……………………………………….Full Article: Source

Fee for commodities traders puts Fed on unfamiliar turf

Posted on 04 November 2013 by VRS  |  Email |Print

The possibility that the Federal Reserve will slap a surcharge on physical commodity trading by banks highlights some tricky new challenges for the US central bank as it tries to rein in Wall Street’s involvement in the raw materials supply chain.
Banking lawyers and finance experts say that implementing a proposal to require additional capital from banks, a possibility first raised by the Wall Street Journal in October, would put the Fed on uncertain ground in formulating a new policy for banks owning physical commodities………………………………………..Full Article: Source

Big banks are looking to dump commodities units

Posted on 04 November 2013 by VRS  |  Email |Print

Facing lingering questions about the oversight and profitability of their businesses, Morgan Stanley and JPMorgan Chase have taken steps to sell their commodity divisions, say people familiar with the matter. The firms are holding discussions with a range of offshore buyers who wouldn’t be subject to relatively stringent US banking rules.
Morgan Stanley held detailed discussions with China International United Petroleum & Chemicals—otherwise known as Unipec—as recently as September about a possible purchase of its commodities-trading division, according to people with knowledge of the talks………………………………………..Full Article: Source

New regulations may curb commodity business of Wall Street banks

Posted on 31 October 2013 by VRS  |  Email |Print

Several major banks involved in commodities business would find the going tough following the Federal Reserve move to regulate the bsuiness and impose new capital charges, according to news reports.
The Federal Reserve may review the permission granted to banking majors who engage in trading of physical commodities such as oil and metals and impose curbs on their operations. This has caused apprehensions among the banking community– Citigroup, Barclays, JPMorgan, Goldman Sachs being some of them……………………………….Full Article: Source

Commodity financing in Asia bright spot for banks amid cutbacks

Posted on 30 October 2013 by VRS  |  Email |Print

Booming commodity trade financing in Asia is a rare bright spot for Western banks, forced to withdraw from other areas of commodities due to tougher regulation and capital constraints.
Commodity revenue for banks has shrunk dramatically in recent years and in the first half of 2013, turnover in the sector for the top 10 investment banks slid by about 20 percent to $2.7 billion, according to financial consultancy Coalition…………………………………….Full Article: Source

Reasons to be wary about banks’ commodity trading: Kemp

Posted on 23 October 2013 by VRS  |  Email |Print

“Bank holding companies ought to confine their activities to the management and control of banks,” the Senate Banking Committee wrote in 1955, reporting favourably on legislation that eventually became the 1956 Bank Holding Company Act.
“Bank holding companies ought not to manage or control nonbanking assets having no close relationship to banking,” the committee went on. Bank holding companies were required to divest shares in nonbanking enterprises and forbidden to acquire new ones, with a few carefully limited exceptions………………………………………..Full Article: Source

Reasons to be wary about banks’ commodity trading: Kemp

Posted on 22 October 2013 by VRS  |  Email |Print

“Bank holding companies ought to confine their activities to the management and control of banks,” the Senate Banking Committee wrote in 1955, reporting favourably on legislation that eventually became the 1956 Bank Holding Company Act.
“Bank holding companies ought not to manage or control nonbanking assets having no close relationship to banking,” the committee went on. Bank holding companies were required to divest shares in nonbanking enterprises and forbidden to acquire new ones, with a few carefully limited exceptions………………………………………..Full Article: Source

China slowdown makes global commodities bearish

Posted on 18 October 2013 by VRS  |  Email |Print

Commodities remain the world’s worst-performing asset class this year, with the benchmark Dow Jones-UBS Commodity Index falling 8.95% year-to-date. A number of factors have conspired against commodities like gold and copper this year, but a key reason is China’s slowing growth.
The Asian giant accounts for more than 40% of global demand for iron ore, lead, copper, aluminum, zinc and nickel, and its economic slowdown has hurt production and demand for a number of commodities. “Also note that China represents 40%-50% of global industrial metals demand, compared with just 12% of global oil demand, and year-to-date base metals prices are down 15% versus just 3% for oil,” said PIMCO, a major investment financial institution………………………………………..Full Article: Source

Fed weighs surcharge on banks’ physical commodity businesses

Posted on 17 October 2013 by VRS  |  Email |Print

Federal Reserve officials are considering imposing a new capital surcharge on Wall Street banks that own oil pipelines, metals warehouses and other lucrative physical-commodities assets, according to people familiar with the matter.
Such an approach could encourage banks to pare back their involvement in physical commodities, which has increasingly raised concerns among regulators and lawmakers………………………………………..Full Article: Source

Hedging your bets

Posted on 17 October 2013 by VRS  |  Email |Print

Markets will be dominated by news from the US in the coming weeks as the political showdown over the funding of the US government continues. So far, the government shutdown has not created high levels of anxiety in markets. This is because the shutdown itself is not the big problem for investors or US politicians, but failure to reach an agreement on the debt ceiling might be.
If the US did default on Treasury debt, the damage to the economy would be huge. The US is expected to reach its borrowing limit around the middle of October, but there is potentially enough cash down the back of the sofa for the US government to continue to meet obligations for another couple of weeks after this without additional borrowing………………………………………..Full Article: Source

Time for governments to end energy subsidies: Wynn

Posted on 11 October 2013 by VRS  |  Email |Print

Governments are failing to deal with rising fossil fuel prices, preferring price caps to win votes and shield industry over efficiency measures which energy agencies say are better value for money.
Energy subsidies have risen year on year since 2008, to $480 billion annually in 2011, according to International Monetary Fund (IMF) figures. That trend will probably continue so long as energy prices continue to rise, and in particular oil………………………………………..Full Article: Source

More than 24 parties eye JP Morgan’s $3.3bln commodities arm

Posted on 11 October 2013 by VRS  |  Email |Print

JP Morgan Chase’s physical commodities business is at the centre of a frenzied bid battle. According to the Financial Times the unit - which has commodities valued at around $3.3 billion and delivers an annual income of $750 million – has won the bid interest of more than a dozen firms.
The paper indicates potential suitors include pension funds and trading houses, with the first round of bids due before the end of the month. JP Morgan Chase announced its plan to exit physical commodities in the summer in a move which surprised markets, as the firm had forked out billions growing the business during the previous 10 years in a bid to become the biggest player in the market………………………………………..Full Article: Source

JPMorgan launches $3.3 bln physical commodity business sale

Posted on 10 October 2013 by VRS  |  Email |Print

JPMorgan Chase & Co (JPM.N) has launched the sale of its physical commodities business, circulating offering documents to potential buyers and valuing the assets at $3.3 billion, according to a person familiar with the matter.
JPMorgan’s sales pitch comes after the bank announced it was exiting physical commodity trading in July, as Wall Street faces heightened scrutiny from regulators and politicians on their role in the natural resources supply chain………………………………………..Full Article: Source

Worst stocks poised to reverse with commodity profits rising 18pct

Posted on 07 October 2013 by VRS  |  Email |Print

Commodity stocks, lagging behind the Standard & Poor’s 500 Index by the most in 15 years, are poised to rally as analysts estimate profits will rise almost twice as fast as the rest of U.S. industry in 2014.
Mining companies and chemical producers in the S&P 500 will increase earnings by 18 percent in 2014, compared with a 11 percent gain for the equity gauge, according to the average of more than 9,000 estimates compiled by Bloomberg………………………………………..Full Article: Source

Commodity assets increase to a four-month high, Barclays says

Posted on 02 October 2013 by VRS  |  Email |Print

Commodity assets under management rose to a four-month high in August as prices of raw materials increased and investors slowed the pace of selling precious metals, Barclays Plc said.
The value of commodity assets under management rose to $363 billion in August, up $13 billion from the prior month, according to an e-mailed report from the bank, which tracks index and exchange-traded products and medium-term notes. Assets were still below a peak of $458 billion in June, the bank said………………………………………..Full Article: Source

More regulatory angst over physical commodities and banks

Posted on 30 September 2013 by VRS  |  Email |Print

Should Goldman Sachs stay in physical commodities? Once the controversy really got hot, JPMorgan wasted no time in announcing that it would exit the business of physically storing metals commodities. The issue is alive for other banks, notably Goldman Sachs, which has taken its lumps over its controversial Metro warehousing facility in Detroit.
Reuters notes that regulators have some big decisions to make. First, the Federal Reserve must decide whether former investment banks Goldman Sachs and Morgan Stanley will “be allowed to continue owning and operating physical assets like oil pipelines and metal warehouses.” ……………………………………….Full Article: Source

JPMorgan leads banks in commodities revenue followed by Goldman

Posted on 20 September 2013 by VRS  |  Email |Print

JPMorgan Chase & Co. (JPM), the largest U.S. bank by assets, generated the most revenue from commodities out of the 10 biggest investment banks in the first six months this year, according to Coalition, an analytics company.
Goldman Sachs Group Inc. (GS) ranked second and Morgan Stanley (MS) was third, Coalition, based in London, said in a report today. For all of last year, Goldman had the most revenue from commodities, followed by JPMorgan and Morgan Stanley. Figures for individual banks weren’t disclosed………………………………………Full Article: Source

Gold selloff sparks Goldman to recommend miners hedge production to head off losses

Posted on 19 September 2013 by VRS  |  Email |Print

Gold mining companies should lock in 2013 prices by hedging their production as all signs point to further declines in the yellow metal in coming months, Goldman Sachs Group analysts said recently.
In a research note, the analysts reiterated their forecast for gold to fall below $1,050/oz in coming months, well below its Wednesday opening price of $1,309/oz. Meanwhile, Goldman’s 2014 year-end price forecast represents a 20 percent decline from current prices………………………………………..Full Article: Source

Fed bond-buying pullback could undermine commodities

Posted on 18 September 2013 by VRS  |  Email |Print

If the Federal Reserve pulls back on its bond buying, the central bank’s actions could further undermine the case for investing commodities, which have been battered by excess supplies and souring sentiment.
The Dow Jones-UBS Commodity Futures Index has dropped 7.9% since the start of the year as investors have sought out stocks and other higher-yielding assets. This is in sharp contrast to 2009, when the index rose 19% partly on the Fed’s post-crisis stimulus efforts………………………………………..Full Article: Source

Banks’ commodity trade exemption should be revoked, Chilton says

Posted on 16 September 2013 by VRS  |  Email |Print

U.S. lawmakers should revoke an exemption that lets Goldman Sachs (GS) Group Inc. and Morgan Stanley own commodity warehouses and other assets, Commodity Futures Trading Commission member Bart Chilton said.
The Wall Street firms, converted to bank holding companies during the 2008 credit crisis, benefit from “extraordinary treatment” under the exemption included in a 1999 law, Chilton said in remarks prepared for a speech tomorrow to the Michigan Agri-Business Association………………………………………..Full Article: Source

Banks face physical commodity curbs

Posted on 11 September 2013 by VRS  |  Email |Print

Wall Street is bracing for a ruling that may hasten the exit of J.P. Morgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley from businesses such as metals warehousing, oil shipping and power generation. Financial-industry executives expect the Federal Reserve to issue guidelines as soon as this month limiting bank participation in so-called physical-commodities businesses.
The decision would mark a significant step in the government’s effort to curtail risky activities on Wall Street, forcing large financial companies to dismantle franchises a decade or more in the making. The rules would apply to all U.S. banking companies………………………………………..Full Article: Source

Hedge fund gold bets climb to highest since January: Commodities

Posted on 09 September 2013 by VRS  |  Email |Print

Hedge funds’ combined holdings in gold futures increased to the most bullish since January on mounting concern that conflict in the Middle East will boost crude-oil prices, slowing economic growth and stoking inflation.
The net-long position rose 3.6 percent to 101,396 futures and options in the week ended Sept. 3, U.S. Commodity Futures Trading Commission data show. Long wagers gained 0.6 percent and short bets contracted 8.6 percent, the fourth consecutive drop and the longest retreat in a year. Combined net-long holdings across 18 U.S.-traded commodities fell 0.3 percent as investors got less bullish on copper………………………………………..Full Article: Source

India: Bid to bring FMC under finance fold

Posted on 09 September 2013 by VRS  |  Email |Print

The government plans to bring the Forward Markets Commission (FMC) under the finance ministry and then consider making it an arm of market regulator Sebi, following the payment crisis at NSEL.
The government is also taking a close look at whether hawala, or illegal money, was used in trading at NSEL — a bourse which seemed to have taken bids far more than the underlying commodities and for longer time frames than allowed. The two groups appointed by the Centre to probe the crisis are expected to submit their reports next week………………………………………..Full Article: Source

Commodities lead gains for third month as emerging markets drop

Posted on 02 September 2013 by VRS  |  Email |Print

Commodities beat bonds, stocks and the dollar for a third month, the longest winning streak in two years, as the prospect of military strikes in Syria boosted oil and gold. Emerging markets declined as currencies plunged from Brazil to Turkey to India.
The Standard & Poor’s GSCI Total Return Index of 24 raw materials rose 3.4 percent in August as U.S. crude reached a two-year high and gold rallied close to a bull market………………………………………..Full Article: Source

The best way to profit from the commodity bust

Posted on 27 August 2013 by VRS  |  Email |Print

What happens to a forest after a forest fire? More often than not, it grows back even healthier than before. Trees damaged in a fire typically die within two years, and dead vegetation falls to the ground. The remaining snags provide a habitat for wildlife and eventually fall to the forest floor, becoming a long-term source of nutrients. It’s a process of creative destruction.
Financial markets can behave the same way. They can crash and burn, clearing out irrational excess in order to build a foundation of sustainable growth. Two prime examples: the tech bubble of the late 1990s and the so-called commodities supercycle………………………………………..Full Article: Source

Sberbank to finance commodity trading

Posted on 23 August 2013 by VRS  |  Email |Print

Two major traders on Thursday welcomed Sberbank as a new player in financing commodity supplies after the lender announced its plans to get on the list of Europe’s largest banks funding Russian exports. The state-controlled lender said it would provide the new service through its Swiss-based subsidiary, with talks being already underway with a number of potential clients.
“These are primarily traders affiliated with Russian exporters or working with commodity suppliers from Russia and [other former Soviet countries],” Sberbank said in e-mailed comments without providing the names………………………………………..Full Article: Source

Banks’ physical commodity trading comes under scrutiny

Posted on 21 August 2013 by VRS  |  Email |Print

Amid a review of a 2003 determination by the Federal Reserve, the involvement of US banks in physical commodities has come under fire from regulators, politicians and the media. Could they really be forced to exit physical trading?
During the last two weeks of July, many Wall Street executives were undoubtedly looking forward to a much-needed summer break. But instead, bank commodity chiefs found themselves engulfed in a maelstrom of criticism about their firms’ involvement in physical commodities………………………………………..Full Article: Source

Commodities and banks: Metal bashing

Posted on 20 August 2013 by VRS  |  Email |Print

The deepening relationship between America’s judicial system and its biggest banks has reached the world of metals. The Commodities Futures Trading Commission (CFTC) has reportedly issued subpoenas to Goldman Sachs, JPMorgan Chase and others as it investigates complaints that banks and other owners of metals warehouses have been hoarding metals and driving up prices.
Private class-action suits filed in federal courts spanning New York, Michigan, Louisiana and Florida have made similar price-fixing allegations, which the banks vigorously deny………………………………………..Full Article: Source

Commodities and banks: Metal bashing

Posted on 16 August 2013 by VRS  |  Email |Print

The deepening relationship between America’s judicial system and its biggest banks has reached the world of metals. The Commodities Futures Trading Commission (CFTC) has reportedly issued subpoenas to Goldman Sachs, JPMorgan Chase and others as it investigates complaints that banks and other owners of metals warehouses have been hoarding metals and driving up prices.
Private class-action suits filed in federal courts spanning New York, Michigan, Louisiana and Florida have made similar price-fixing allegations, which the banks vigorously deny………………………………………..Full Article: Source

Why fuel subsidies are bad for everyone

Posted on 14 August 2013 by VRS  |  Email |Print

I have posted frequently (most recently in a three-part series that starts here) on the topic of underpricing of energy in the United States, but we are not the only offender. Many countries around the world subsidize consumer energy prices in ways that bring them to levels even lower than what U.S. consumers pay.
These policies burden the rich and the poor alike—rich countries like Saudi Arabia and poor ones like Egypt, and within each country, both rich and poor citizens………………………………………..Full Article: Source

Regulators to test commodities bankers’ mettle

Posted on 12 August 2013 by VRS  |  Email |Print

The growing involvement of banks in commodities markets is finally being placed under the microscope. Next month the US Federal Reserve is expected to report on whether it will allow US banks to continue with their current involvement in the commodity markets. Its action could well prompt governments around the world to follow the lead.
Metals, energy and soft commodities are all now heavily influenced by the activities of banks: whether it is financing, physical trading, warehousing or derivatives. Most of these areas are unregulated and opaque and thus render the banks open to allegations of conflicts of interest and abuse………………………………………..Full Article: Source

China banks gear up for commodity foray

Posted on 12 August 2013 by VRS  |  Email |Print

Leading Chinese banks, brokerages and securities firms are getting ready to snap up commodities trading assets from their foreign counterparts which are facing tougher regulatory and political pressure in trading physical raw materials.
However, sweeping changes to warehousing regulations could bring a decade-long commodity rally to an end, industry participants and analysts said………………………………………..Full Article: Source

You handed OPEC a trillion dollars again last year

Posted on 12 August 2013 by VRS  |  Email |Print

Export earnings among OPEC members rose to $1.26 trillion last year. That’s up from the $1.15 trillion it earned in 2011. That’s an incredibly large number. The entire U.S. economy is estimated to be $16.62 trillion, meaning OPEC’s earnings are about 7.5% of the size of the entire American economy.
While the U.S. isn’t solely responsible for pouring a trillion dollars into OPEC’s coffers, it is on track to send another $400 billion to foreign nations again this year. About 39% of that will end up padding OPEC’s bottom line this year………………………………………..Full Article: Source

Getting big banks out of the commodities business

Posted on 09 August 2013 by VRS  |  Email |Print

A debate has broken out over whether the country’s largest banks should be allowed to own physical commodities, including the facilities used to transport, store and process these goods.
This may be the strangest debate we have had about banking in the United States in the last five years, because the answer is completely obvious: it is a new and very bad idea to allow big banks to also dominate any dimension of the commodities business. It is also not sustainable politically, and the big banks will soon have to divest themselves of these activities………………………………………..Full Article: Source

Why are banks’ physical commodity assets so controversial?

Posted on 09 August 2013 by VRS  |  Email |Print

After weeks of discussions by regulators on whether banks should continue to be allowed to own physical commodity assets such as warehouses, oil tankers and power plants, Financial News looks at why bank ownership of commodity assets is so controversial.
At a hearing in front of the US Senate Banking Committee last week, Commodity Futures Trading Commission chairman Gary Gensler said: “These markets [commodities] matter. They matter on the dining table at night. They matter for somebody buying a six-pack of beer. They matter when we all fill up a tank of gas.”……………………………………….Full Article: Source

Gold: Not much of a hedge for anything, unless you’re a centurion

Posted on 09 August 2013 by VRS  |  Email |Print

Gold has many uses, but as a hedge against inflation or a declining dollar, it’s a flop. That’s the conclusion of an exhaustive article in the current issue of the Financial Analysts Journal, which examines six different explanations for why gold prices rise and fall.
Authors Claude Erb and Campbell Harvey, a professor at Duke University’s Fuqua School of Business, conclude that the assumptions of most investors — that gold rises during times of inflation, or serves as a hedge against a collapsing dollar — don’t measure up. The most likely explanation for why gold prices go up is because gold prices are going up………………………………………..Full Article: Source

Which banks own physical commodity assets?

Posted on 08 August 2013 by VRS  |  Email |Print

On the coast of Colombia there is a port that goes by the name of Sociedad Portuaria de Río Córdoba; a privately operated facility for loading coal onto vessels for export. It is also owned by global investment bank Goldman Sachs.
As discussions heat up among regulators on banks owning commodity assets it is worth asking who exactly owns what?……………………………………….Full Article: Source

Why do banks own physical commodity assets?

Posted on 07 August 2013 by VRS  |  Email |Print

The average Joe on the street would be forgiven for thinking that banks are supposed to move money, not metal. But events in recent weeks have put paid to that misconception.
Last week in a lawsuit filed in a Detroit court, aluminium product manufacturer Superior Extrusion sued Goldman Sachs, along with the London Metal Exchange, for alleged “anti-competitive and monopolistic behaviour in the warehousing market in connection with aluminium prices”, according to Hong Kong Exchanges and Clearing, the parent company of the LME………………………………………..Full Article: Source

Commodities revenue of top 10 banks fell 25% in first half

Posted on 06 August 2013 by VRS  |  Email |Print

Commodities revenue at the 10 largest investment banks fell 25 percent in the first half, putting those units on pace for the worst annual performance in more than five years, according to analytics company Coalition Ltd.
Revenue fell to about $2.7 billion in the first six months from $3.6 billion in the same period of 2012, Coalition said today in an e-mail. Last year’s total of $6 billion was down 24 percent from 2011 and was less than half that of 2008, when oil prices climbed to a record………………………………………..Full Article: Source

Commodities revenues plummet at top banks

Posted on 05 August 2013 by VRS  |  Email |Print

The world’s 10 largest investment banks suffered a 25% plunge in their commodities revenues in the first half of the year as the units continued to suffer from regulatory scrutiny and lower market volatility.
The early calculations from research provider Coalition mean combined revenues fell from $3.6 billion in the first half of last year to $2.7 billion, according to Financial News analysis………………………………………..Full Article: Source

India: Commexes’ turnover dips by 42 pct due to CTT in July 1-15

Posted on 05 August 2013 by VRS  |  Email |Print

The turnover of 22 commodity bourses fell by 42 per cent to Rs 4,07,670 crore in the first fortnight of July mainly due to sharp fall in business at MCX following the imposition of commodity transaction tax (CTT) on the futures trading of non-farm items and some processed food.
The turnover of these commodity bourses stood at Rs 7,08,342 crore during the June 16-30 period, the immediate fortnight before the introduction of CTT. CTT of 0.01 per cent has been made effective from July 1 on the futures trading of non-agri commodities and processed foods. The government has exempted 23 agricultural commodities from the new tax………………………………………..Full Article: Source

Commodities losing their allure as hedge against volatility

Posted on 02 August 2013 by VRS  |  Email |Print

A new study from the Bank for International Settlements disputes the idea that adding commodities to a portfolio can lower the volatility of returns. Considering this has been the bedrock idea underlying the buying and selling of commodities as an asset class over the past 15 years, this is big news.
Taken in combination with trends negative for commodities markets such as the migration of manufacturing back to developed markets and 3D printing, there may be fewer reasons for investors to consider the asset class…………………………………..Full Article: Source

Let’s (not) get physical: The commodities conundrum facing banks

Posted on 02 August 2013 by VRS  |  Email |Print

Should banks own and trade physical commodities? That was the question asked of senior regulators by the US Senate Banking Committee last week. US regulators are reviewing the trading and ownership of physical commodities by banks following increasing concerns about the length of time London Metal Exchange warehouses are taking to deliver assets.
A number of these warehouses are owned by bank and they have been accused of profiting from delays. Banks have also been accused of driving up prices, particularly in aluminium, because of the premiums owners are forced to pay for their metal to be delivered more quickly………………………………….Full Article: Source

End of an era as banks eye commodities exits

Posted on 01 August 2013 by VRS  |  Email |Print

JPMorgan Chase’s announcement Friday that it will look to exit the physical commodities business steps up the pressure on rivals to follow suit. “All the banks with commodity units are watching and waiting to see if regulators will force them out of physical commodity trading completely or [require them to] make a minor modification. There is no panic but there is a high level of anxiety,” says George Stein, managing director of recruiting firm Commodity Talent LLC.
Goldman Sachs and Morgan Stanley have owned physical commodities assets to supplement their ownership of paper assets going back as far as the 1980s. They continue to be major players in physical commodities, as do other global banking and securities giants such as Citigroup, Bank of America, Barclays, Deutsche Bank and Credit Suisse………………………………………..Full Article: Source

Megabanks and commodities don’t mix

Posted on 01 August 2013 by VRS  |  Email |Print

Opening up commodities markets to megabanks has failed. It’s time to break up the banks’ business lines. The Federal Reserve has blood on its hands from the most recent financial crisis. In the 1990s, Alan Greenspan and Fed researchers helped promote the explosive use of securitizations and credit derivatives as risk management tools for financial firms.
A May 1996 speech exemplifies Greenspan’s failure to grasp not only how these approaches would influence bankers’ behaviors but also what the economics and risks would be, calling securitization “a paradigm of the evolving risk management techniques in financial markets.”……………………………………….Full Article: Source

Commodity-linked structured note sales slump to nine-year low

Posted on 01 August 2013 by VRS  |  Email |Print

Banks are selling the least structured notes tied to commodities in nine years as investors shun the securities amid a slowdown in China’s economy and the prospect of the U.S. Federal Reserve winding down stimulus.
Global issuance in the first half of the year fell to about $2 billion, 41 percent lower than the same period of 2012 and the least since 2004 with securities linked to oil and gold among the biggest losers, according to a report from Barclays Plc………………………………………..Full Article: Source

U.S. deepens scrutiny of banks’ roles in commodities

Posted on 31 July 2013 by VRS  |  Email |Print

Wall Street banks face the prospect of increased scrutiny of their commodity businesses as U.S. regulators and lawmakers on Tuesday pressed for a closer look at their roles in owning warehouses and in trading everything from oil to metals
Under pressure from a handful of lawmakers to explain why banks including JPMorgan Chase & Co. and Goldman Sachs have been allowed to own warehouses and trade physical commodities, regulators have scrambled this month to demonstrate that they are tackling the issue………………………………………..Full Article: Source

Senate panel opens probe of banks’ commodities businesses

Posted on 31 July 2013 by VRS  |  Email |Print

A U.S. Senate panel known for hard-hitting investigations of Wall Street and financial markets has launched a preliminary examination into potential conflicts of interest posed by banks’ role in physical commodity markets, according to people familiar with the matter.
The U.S. Senate Permanent Subcommittee on Investigations, led by Sen. Carl Levin (D.,Mich.), has sent information requests in recent months to banking giants J.P. Morgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley, as well as their primary regulator, the Federal Reserve, one of the sources said………………………………………..Full Article: Source

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