Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
Will Labour Government Spending Bankrupt Britain? UK Debt and Deficits - 7th Dec 19
Lib Dem Fake Tory Election Leaflets - Sheffield Hallam General Election 2019 - 7th Dec 19
You Should Be Buying Gold Stocks Now - 6th Dec 19
The End of Apple Has Begun - 6th Dec 19
How Much Crude Oil Do You Unknowingly Eat? - 6th Dec 19
Labour vs Tory Manifesto Voter Bribes Impact on UK General Election Forecast - 6th Dec 19
Gold Price Forecast – Has the Recovery Finished? - 6th Dec 19
Precious Metals Ratio Charts - 6th Dec 19
Climate Emergency vs Labour Tree Felling Councils Reality - Sheffield General Election 2019 - 6th Dec 19
What Fake UK Unemployment Statistics Predict for General Election Result 2019 - 6th Dec 19
What UK CPI, RPI and REAL INFLATION Predict for General Election Result 2019 - 5th Dec 19
Supply Crunch Coming as Silver Miners Scale Back - 5th Dec 19
Gold Will Not Surpass Its 1980 Peak - 5th Dec 19
UK House Prices Most Accurate Predictor of UK General Elections - 2019 - 5th Dec 19
7 Year Cycles Can Be Powerful And Gold Just Started One - 5th Dec 19
Lib Dems Winning Election Leaflets War Against Labour - Sheffield Hallam 2019 - 5th Dec 19
Do you like to venture out? Test yourself and see what we propose for you - 5th Dec 19
Great Ways To Make Money Over Time - 5th Dec 19
Calculating Your Personal Cost If Stock, Bond and House Prices Return To Average - 4th Dec 19
Will Labour Government Plant More Tree's than Council's Like Sheffield Fell? - 4th Dec 19
What the UK Economy GDP Growth Rate Predicts for General Election 2019 - 4th Dec 19
Gold, Silver and Stock Market Big Picture: Seat Belts Tightened - 4th Dec 19
Online Presence: What You Need to Know About What Others Know About You - 4th Dec 19
New Company Tip: How To Turn Prospects into Customers with CRM Tech - 4th Dec 19
About To Relive The 2007 US Housing Market Real Estate Crash Again? - 3rd Dec 19
How Far Will Gold Reach Before the Upcoming Reversal? - 3rd Dec 19
Is The Current Stock Market Rally A True Valuation Rally or Euphoria? - 3rd Dec 19
Why Shale Oil Not Viable at $45WTI Anymore, OPEC Can Dictate Price Again - 3rd Dec 19
Lib Dem Election Dodgy Leaflets - Sheffield Hallam Battle General Election 2019 - 3rd Dec 19
Land Rover Discovery Sport Brake Pads Uneven Wear Dash Warning Message at 2mm Mark - 3rd Dec 19
The Rise and Evolution of Bitcoin - 3rd Dec 19
Virtual games and sport, which has one related to the other - 3rd Dec 19
The Narrative About Gold is Changing Again - 2nd Dec 19
Stock Market Liquidity & Volume Diminish – What Next? - 2nd Dec 19
A Complete Guide To Finding The Best CFD Broker - 2nd Dec 19
See You On The Dark Side Of The Moon - 2nd Dec 19
Will Lib Dems Win Sheffield Hallam From Labour? General Election 2019 - 2nd Dec 19
Stock Market Where Are We?  - 1st Dec 19
Will Labour's Insane Manifesto Spending Plans Bankrupt Britain? - 1st Dec 19
Labour vs Tory Manifesto Debt Fuelled Voter Bribes Impact on UK General Election - 30th Nov 19
Growing Inequality Unrest Threatens Mining Industry - 30th Nov 19
Conspiracy Theories Are Killing This Nation - 30th Nov 19
How to Clip a Budgies / Parakeets Wings, Cut / Trim Bird's Flight Feathers - 30th Nov 19
Hidden Failure of SIFI Banks - 29th Nov 19
Use the “Ferrari Pattern” to Predictably Make 431% with IPOs - 29th Nov 19
Tax-Loss Selling Drives Down Gold and Silver Junior Stock Prices - 29th Nov 19
We Are on the Brink of the Second Great Depression - 29th Nov 19
How to Spot REAL Amazon Black Friday Bargains and Avoid FAKE Sales - 29th Nov 19

Market Oracle FREE Newsletter

UK House prices predicting general election result

Dark Pools of Capital Should Be Closed

Stock-Markets / Market Manipulation Sep 18, 2013 - 06:46 PM GMT

By: Bloomberg

Stock-Markets

John Thain--chairman and CEO of CIT Group, former CEO of Merrill Lynch and former CEO of NYSE--sat down for a wide-ranging interview with Bloomberg Television's Erik Schatzker and Stephanie Ruhle on "Market Makers" yesterday. Thain said that there is too much fragmentation and insufficient transparency in the stock market and that dark pools should be eliminated.

Thain went on to speak about bank compensation, saying that pay and talent can emphasize risk management and that "the problem is bonus is a bad word these days."


Thain on why he believes a 2008-style crisis could "absolutely" happen again:

"Well if you look at hundreds of years of markets, there have always been periods of time when you get over-exuberance, you get over-leverage. You get bubbles of some type, and then those bubbles burst. And there's nothing that would lead you to believe that that can't happen again. There's a great book written by Kindleberger on manias, panics and crashes, and it chronicles crashes and manias and panics over a couple hundred years. And it's just - it's the type of things that markets are susceptible to."

"We're right now in a post-bubble period. And the post-bubble period tends to be safer. Leverage is lower. The lending environment is more conservative. And we're seeing economic growth but weak economic growth. And so you don't see excesses right now in the system, but over time as people get more confident, and in particular as money remains very, very cheap, there is certainly a risk you get another form of a bubble."

On the London whale and whether regulators are really equipped to regulate the big banks:

"Well the London whale was a very different thing. It wasn't a loan. It wasn't lending. So the very complicated financial institutions when they're trading in very complicated instruments, which those were, that's a much more difficult question for the regulators. In terms of pure lending, they can get their handle on - on loans to leveraged institutions."

On whether those in risk management get paid enough or are respected enough that they can actually be influential:

"So I think this is a really good question, and it depends a lot on the financial institution. As you know, one of the jobs I had in the past was at Goldman Sachs. I was the CFO, and all of the risk management reported to me. Goldman had a unique philosophy of emphasizing risk management just as importantly as the risk takers...And so if you emphasize it correctly, if you take the most talented people and if you pay them, you can make risk management just as important as risk taking."

On Wall Street compensation:

"The problem is bonus is a bad word these days. And so people don't like the concept of bonuses. So think about it differently. Think about it as variable compensation. It has to be better to have variable compensation so that you can adjust compensation for the performance of the person, for the performance of the business, for the performance of the company. Because if you just had fixed compensation, which you could do, you could just pay people fixed amounts, but then you don't have the flexibility that the variable compensation gives you."

On whether anyone actually institutes clawbacks in a real way:

"So JPMorgan is the perfect example. They are in fact, to my understanding based on what I read in the press, clawing back money from the traders who lost that money. So they are in fact going to do that, and that's a good thing."

"So first of all, if you use equity as a substantial portion of people's compensation, you do tie them to the shareholders. And so if they cause big losses or cause the failure of an institution, they will suffer along with their shareholders. That's a different question when you get to the taxpayers and should the taxpayers be supporting these financial institutions. But from a shareholder point of view, if you use a lot of equity, you do in fact line up your employees. And if you tie it to long-term performance, along with clawbacks, you do in fact get better alignment."

On how he would fix the stock market:

"The biggest problem is the fragmentation. So you can trade stocks in 50 different places. There's no transparency in most of those places. That's not good for the market. That's not good for retail investors....One of the things you could do though is force transparency. So you have to have much clearer pricing and so you can see the..."

On whether he would eliminate dark pools:

"I would...I think that would go a long way. And then allowing stocks to trade in their primary market and have that primary market control when they trade. So for instance, part of the problem has been if you have a stoppage on the New York Stock Exchange, at least historically that didn't necessarily stop trading other places. And that causes a lot of volatility."

On what the NYSE's value is:

"Well, it's a number of things. First of all, it is a great brand, and it's also a symbol of America's marketplace. It's a listing venue where the most prestigious companies in the world are listed there."

On whether he has more faith in the futures market than in the cash equities market:

"No, it's not a question of faith. It's a question of the profitability model of the marketplaces. So as I said you can only trade futures in one place. You can't trade it in 50 places. The value of the New York Stock Exchange, and you see this in whenever there's something unusual. So opens, closes, some unusual event or somebody makes a mistake. The fact is a person can catch a mistake that sometimes the computers don't."

On whether he sees Federal Reserve policy as a big risk:

"Well I think it's a risk. It's not such a big risk right at the moment because, as I said, leverage is still relatively low and the lending standard are still relatively good. And so you haven't really seen the erosion in standards or quality, and you haven't seen leverage go up that much, but that's certainly a risk as people push out on the - on the curve to try to get more yield."

"I don't think it's the same as it was pre-crisis. So I don't think you're seeing as much leverage as in 2007. I don't think you're seeing as risky deals, but it is tending that way particularly on bigger deals, much less so in the middle market."

On what kind of impact the Fed taper will have on middle markets:

"So I think that the market is over-estimating the impact of the taper. We know that the Fed's been buying these securities. We know that they've been artificially pushing down long-term interest rates. That's got to change. It can't last forever. The market is already anticipating the reduction in the taper. Long-term rates are already higher. It's the short-term rates that are going to stay low, and that's what really drives the economy."

On whether Fed stimulus is addictive:

"I don't think so. I think that the Fed will simply slow down their buying. As I said, long-term rates already are anticipating it. They'll go up. The curve will get steeper...I think the market will be fine without it."

bloomberg.com

Copyright © 2013 Bloomberg - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Bloomberg Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules