Goldman Sachs is responsible for a massive chunk of the 'Trump rally' (GS)

Business Insider

 Dec. 7, 2016, 11:10 AM

The stock market has gone on quite a tear since the election of Donald Trump. In fact, the colloquial name for the recent surge in the market is the "Trump rally."

One company has stood above the rest during this "Trump rally," however.

As noted by market legend Art Cashin, the director of floor operations at UBS and long-time trading veteran, Goldman Sachs, one of the 30 stocks making up the Dow Jones Industrial Average index, has been responsible for a huge amount of the increase in that index. From Cashin's daily commentary on Wednesday (emphasis added):

"The Dow closed up 35 points and almost 23 of those points came from Goldman Sachs (GS). In fact, our good friend and fellow trading veteran, Jim Brown, at Option Investor, points out that GS has rallied $57 since the election. That means that GS has provided 441 of the 1363 points that the Dow has rallied. In case your calculator batteries are dead, that's about one third of the rally, all due to Goldman."

In fact, the recent jump for Goldman has put the stock at an all-time high.

Investors seem to be betting that the deregulation of the financial industry - Trump and his new Treasury Secretary Steven Mnuchin have talked about rolling back the Dodd-Frank Act passed after the financial crisis - and rising interest rates in the bond market could be a boon for Goldman.

Trump was sometimes critical of the bank prior to the election, even featuring Goldman CEO Lloyd Blankfein in an ad highlighting people that the candidate claimed did not have America's interests in mind. Blankfein came out after the ad in support of Hillary Clinton.

Trump has hired a number of Goldman Sachs alums in powerful administration positions, including Mnuchin, who was a Goldman banker for 17 years.

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Citi is being investigated for its role in the pound's 'flash crash'

• Oscar Williams-Grut
 

• 10h
• 954

Citi's Japanese operation is being investigated.REUTERS/Kim Kyung-Hoon

Citi's Japanese trading operation is being closely investigated by the Bank of England for its role in October's "flash crash" of the pound, the Financial Times reports.

The report claims that while Citi did not start the crash, its Japanese trading operation made things worse by placing a large number of sell orders after the initial fall began, citing people with knowledge of the investigation.

The problem reportedly stemmed from one trader. The paper quotes an unnamed source as saying the trader in question "panicked" when the pound started to fall.

Sterling plunged to a three-decade low in Asian trade in early October, falling as much as 6% in just 2 minutes. While the motivation for the initial fall is not clear, traders said at the time that thin trading volumes meant the impact was outsized and created a downward spiral as the slump triggered more algorithms to sell. The FT says that the Citi trader in question fired off multiple sell orders, sending the pound spiralling.

Citi told Business Insider in a statement: "Sterling fell sharply following a news event just after midnight UK time, when the GBP spot foreign exchange market was extremely illiquid.

"Citi managed the situation appropriately and our systems and controls functioned throughout the period."

The Bank of England has said possible triggers for the initial crash include: "A large trade executed erroneously (a so-called “fat finger” error), the use of a poorly calibrated execution algorithm, unsophisticated retail trading, or a deliberate attempt to move the price lower."

It added that it was investigating the possibility of "idiosyncratic actions of individual market participants in driving the subsequent price falls." Citi was not named in the report.

You can read the full FT report here.

Top Republican says he won't back Trump's plan for huge tariffs

• Allan Smith
 

• 18h
• 12,266

Kevin McCarthy. Mark Wilson/Getty Images

House Majority Leader Kevin McCarthy declined on Monday to support President-elect Donald Trump's proposal to impose a 35% tariff on companies that leave the US.

The California Republican was responding to a series of tweets from Trump over the weekendoutlining his plan to impose a large tariff against companies that ship jobs overseas. The tariff would be imposed on the goods shipped back into the US.

Speaking to reporters, McCarthy warned that it would lead to a trade war.

"I don’t want to get into some type of trade war," McCarthy said.

McCarthy, the No. 2 Republican in House leadership following House Speaker Paul Ryan, said he would not commit to bringing that tariff proposal to the House floor for a vote, adding the Republican Party's efforts at tax reform would create an improved business environment and would render such a tariff unnecessary.

"I think there are other ways to achieve what the president-elect is talking about," McCarthy said, "but the only way you can do any of this is you’ve got to do tax reform. And that’s why I think that will be a cornerstone of what we do."

"Tax cuts and deregulation will make the American economy great again, but tariffs and trade wars will make it tank again," he continued.

McCarthy was also pressed about the deal to provide $7 million in incentives to Carrier over 10 years in order to keep roughly 1,000 jobs in Indiana, a deal that has been criticized by many free-marker conservatives such as former Alaska Gov. Sarah Palin.

"Do you want to know my philosophical belief?" McCarthy said. "I believe in the free market. I don’t think government should be picking winners and losers."

He cautioned reporters against judging what Trump will do ahead of taking office.

"Take a deep breath," he said. "He’s not sworn in yet. I know you gotta write news, but let’s not predetermine what the outcome is yet. ... Is he president of the United States right now? So what did he give them? He has no authority yet to give them anything."

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CARNEY: Britain is in 'the first lost decade since the 1860s'

• Oscar Williams-Grut
 

• 9h
• 894

Bank of England Governor Mark Carney delivers the Liverpool John Moores University's Roscoe Lecture, at the BT Convention Centre in Liverpool, Britain December 5, 2016. REUTERS/Peter Byrne/Pool

LONDON — Bank of England Governor Mark Carney thinks Britain is facing "the first lost decade since the 1860s" when "Karl Marx was scribbling in the British Library."

Carney said in a speech on Monday in Liverpool that stagnant wage and productivity growth means Brits are no better off today than they were prior to the onset of the financial crisis in 2008.

He added that, with Brexit looming, low real wage growth is set to continue: "The only question is how this comes about: either through a compression of nominal wage growth and higher unemployment, or through faster growth in consumer prices and a smaller rise in joblessness."

This wage stagnation, combined with income and wealth inequality, has led to a widespread backlash against free trade and globalisation.

Carney told the audience at the Liverpool John Moores University, "We meet today during the first lost decade since the 1860s. ... Rather than a new golden era, globalisation is associated with low wages, insecure employment, stateless corporations, and striking inequalities."

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The shock election of Donald Trump as President of the United States has been interpreted by many commentators as a rejection of globalisation, with Trump campaigning to "Make America Great Again" and returning manufacturing jobs to the US.

Carney said central bankers and governments must do more to look after those who feel left behind by the forces of globalisation, saying: "The combination of open markets and technology means that returns in a globalised world amplifies the rewards of the superstar and the lucky. Now may be the time of the famous or fortunate, but what of the frustrated and frightened?"

As well as name-checking Karl Marx, one of the founders of communism, in his introduction, Carney also suggested a solution to the problems that he identified that could be seen as communist.

He appeared to reject the "trickle down" economic theory favoured by those on the right — saying "while trade makes countries better off, it does not raise all boats" — and called for at least some limited wealth redistribution.

Carney said: "For free trade to benefit all requires some redistribution." He called on politicians to develop a system of "inclusive growth where everyone has a stake in globalisation."

However, the governor added: "There are limits, of course, because of fiscal constraints at the macro level and the need to maintain incentives at the micro level. Fostering dependency on the state is no way to increase human agency, even though a safety net is needed to cushion shocks and smooth adjustment."

If the government, central banks, and private corporations do not make changes to adopt "inclusive growth," Carney warns: "Turning our backs on open markets would be a tragedy, but it is a possibility. It can only be averted by
confronting the underlying reasons for this risk upfront."

Former Chancellor George Osborne said at an event in London last month he believes "western" values such as democracy, free trade, and open society are at risk of being "rolled back" and says people must "fight" to protect them.

Some commentators have blamed low interest rates for rising inequality — savers can not make much return while a flood into things like property and stocks creates an asset price bubble that favours the well off, or so the theory goes.

The governor defended the Bank of England's monetary policy, saying the Bank's actions helped to avert an economic depression in the wake of the financial crisis.

But he said: "Long-run prosperity is not in the gift of central bankers. It depends on a much wider set of initiatives of our elected representatives, and ultimately, on the actions of the private sector."

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GLOBE EDITORIAL

Jobs, Mexico and the dangers of Trumpenomics

The Globe and Mail (includes correction)

Published Sunday, Dec. 04, 2016 5:00PM EST

Last updated Monday, Dec. 05, 2016 1:52PM EST

• 12 Comments
•  PrintLicense article

Donald Trump’s direct involvement in a deal to keep jobs in a factory in Ohio from being lost to Mexico is a savvy move by the president-elect. It fits his message perfectly. He is the deal-maker, the strong man who doesn’t wait for the politicians and bureaucrats to fix a problem but does it himself.

The deal is also good for the 1,000 employees at a Carrier air-conditioner plant in Indianapolis who will keep their jobs. But it should be worrying to America’s corporations. They are now faced with the prospect of a president who picks favourites and demands something in return for doing so.

The Carrier deal, for instance. Mr. Trump vowed during the campaign (and still does) to impose a 35 per cent tariff on any product manufactured in Mexico by an American company that is shipped back to the U.S. for sale.

Konrad Yakabuski: Trump's Carrier deal is a bad economic omen

Read more: Trump's protectionist trade stance sparks concerns of global trade war (subscribers)

John Ibbitson: For Trump, the show never stops

That’s not what happened here, since Mr. Trump has not yet been sworn in. What it seems he did do, though, is make it clear that he will remember who his friends are once he is in the Oval Office.

Carrier will get $7-million (U.S.) in state subsidies in exchange for keeping its Ohio plant open. But people who worked on the deal say it is the hard reality that Carrier’s parent company, United Technologies, does billions of dollars’ worth of business with the U.S. government that saved those jobs.

It was apparently made clear to United Technologies that embarrassing Mr. Trump by not striking a deal would be more costly than accepting subsidies to keep one minuscule part of its business on American soil.

This is how business is done in Russia and other countries ruled by despots. Corporations know they have to support the leader’s policies if they want access to lucrative contracts and favourable regulation. The rule of law, which allows businesses to make decisions based on consistent, reliable terms that can be enforced by courts and judges, is replaced with favouritism and cronyism.

Mr. Trump has only done this once. Who knows what the future will bring. But it’s a bad precedent, and he has said he’ll do it again. If he intends to spend his presidency picking economic winners and losers and dispensing economic largesse on a very personal basis, a country once thought of as a safe place to invest will become a risky option. In the long run, that will hurt America’s economy a lot more than the ebb and flow of manufacturing jobs ever will.

Editor's Note: An earlier version of this editorial incorrectly identified the Carrier factory as being in Ohio rather than Indiana. This version has been corrected.

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MORE RELATED TO THIS STORY

• Job deals like Carrier's often fall short of political hype
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• JOHN IBBITSON For Trump, the show never stops

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China is urging Washington to stop disrupting its foreign corporate acquisitions

• Associated Press

• 13h
• 3,958

Barack Obama Getty Images

BEIJING (AP) — China urged Washington on Monday to stop disrupting its foreign corporate acquisitions after President Barack Obama blocked the purchase of a German maker of semiconductor manufacturing equipment as a security risk.

The proposed acquisition of Aixtron SE by China's Fujian Grand Chip was "pure market behavior," said a foreign ministry spokesman, Lu Kang.

On Friday, Obama ordered Fujian Grand Chip to drop its attempt to take over Aixtron's California subsidiary. The government said Aixtron's technology has "military applications."

"We hope that the United States will cease making groundless accusations about Chinese companies and will provide a fair environment and favorable conditions for investment by them," said Lu at a regular briefing. "I think this matter will in the long run be in the interests of all the parties concerned."

It was the third time in three decades that a U.S. president has blocked an acquisition by a Chinese company on security grounds.

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Germany approved the 670 million euro ($740 million) takeover of Aixtron's German parent but said last week it was reconsidering due to unspecified "security-related questions."

Chinese companies have made a multibillion-dollar string of acquisitions in Europe to obtain technology and brands including Club Med, Pirelli tires and Volvo Cars.

Many Europeans welcome the influx of money but China faces criticism from business leaders that they are blocked from making similar acquisitions in its state-dominated economy.

Aixtron, based in Herzogenrath, says its headquarters, research and development operations and existing technology would remain at its current sites under the proposed acquisition.

In 2012, Obama blocked Chinese-owned Ralls Corp. from building a wind farm near a naval base in Oregon. In 1990, then-President George Bush blocked the purchase of MAMCO Manufacturing Inc., a maker of aircraft parts, by a Chinese state-owned company.

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