Stocktake

Compiled by PRONSIAS O'MAHONY

Embarrassing emails at Barclays

“I LOVE you”; “For you . . . anything”; “Superstar”; “Done . . . for you big boy”.

No, not Mills & Boon; these snippets come from emails sent between traders and bankers at Barclays, which was last week fined £290 million (€360 million) to settle charges of interest rate-rigging in the Libor and Euribor markets.

Both markets represent the average rate at which banks will lend to each other and are calculated through a survey of participating banks.

By submitting low rates, traders hoped to keep rates artificially low and boost their own trading positions. “Dude. I owe you big time!” read one ecstatic email. “Come over one day after work and I’m opening a bottle of Bollinger.”

It’s a wonder traders continue to be so casual about conducting such business electronically, given the myriad scandals revealed via email in recent years.

It is particularly embarrassing for Barclays boss Bob Diamond, who said last year the “period of remorse and apology” for banks “needs to be over”.

Don’t take them for granted

EUROPEAN MARKET tensions have fallen of late, with the VStoxx, or fear gauge, down by 27 per cent. However, Ray Dalio, who this year replaced George Soros as the most successful hedge fund manager ever, reckons the “popular assumption” that Germany and the ECB will ultimately ride to the rescue “should not be taken for granted”.

In a letter to clients, Dalio cautioned that European alliances were “shifting in a logical manner”; contributor and recipient countries increasingly view each other as inflexible and irresponsible.

“Students of human nature and deleveragings know that this is to be expected,” writes Dalio, whose rigorous analysis led him to foresee the global financial crisis. The dreaded “fat tail” event, or Lehman II, “must be considered a significant possibility.”

Whether Thursday night’s euro zone deal placates such fears will become clearer in coming weeks.

Grim picture for Chinese index

WHILE MOST international markets rebounded in June, things have gotten worse in China. Continued falls last week saw the Shanghai Composite Index extend its losing streak to seven days, while June’s 7.5 per cent decline dragged it to its lowest levels since January.

Longer term, the picture is even grimmer. The index has lost two-thirds of its value since peaking in 2007 and is trading at levels first seen 12 years ago. It is now valued at 9.5 times estimated earnings, almost half its average figure over the last six years.

JP Morgan may lose up to $9bn

REPORTS LAST week suggested that JP Morgan might lose as much as $9 billion on its disastrous credit bets – over four times chief executive Jamie Dimon’s initial estimate.

In May, Dimon announced losses of $2 billion, adding that losses could double in coming quarters, with the trade being slowly unwound through 2013. That unwinding is now said to be progressing in a hastier manner.

Dimon, long lauded for his banking savvy, dismissed reports of outsized credit bets as a “tempest in a teapot” as recently as April. A leading opponent of regulatory reform, his case – essentially, trust us – has been seriously damaged.

Blackberry woes

BLACKBERRY MAKER Research in Motion took another pounding last week after being downgraded from equal weight to underweight by Morgan Stanley, who said the stock’s “rapidly deteriorating fundamentals” meant the company was “essentially broken”.

Investors, alas, might have preferred to have heard such a call before, rather than after, the stock had already fallen by 94 per cent, from $144 in 2008 to below $10 earlier last month. Analysts – don’t need them in a bull market, don’t want them in a bear market.