All Articles Finance Modern Money While You Were Working - March 3

While You Were Working – March 3

Yellen calls the play, Size and speed matter, Uber fumbles and Nasdaq talks AI

4 min read

Modern Money

Janet Yellen

Federal Reserve Chair Janet Yellen - Photo credit: Chip Somodevilla/Getty Images

Omaha! Omaha!

It looks like the Federal Reserve is about to hike rates later this month. Fed Chair Janet Yellen said a bump “would likely be appropriate” if current economic conditions continue. Yellen’s comments did produce this stellar quote from Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management: “A rate hike isn’t just baked into the cake, the cake is practically decorated and ready to have the candles lit.”

If Yellen is the quarterback, then I guess today was the equivalent of “Hutt! Hutt!”

Size Matters, But Not as Much as Speed

The arrival of the Trump administration has many in the realm of global financial regulation a wee bit nervous about a new wave of fragmentation that could take hold if (when) the US rolls back some of the reforms put in place in the aftermath of the financial crisis. What is not talked about as often is how the varying speeds with which US and European regulators responded to the last crisis has amounted to its own special brand of fragmentation. Think about that when you read this Wall Street Journal piece about the shrinking pie of investment bank business and how European banks are struggling to keep pace with their US counterparts.

Of particular interest is how the bigger European firms like Barclays, Credit Suisse, Deutsche Bank and UBS are struggling more than the second-tier European firms.

“Part of the problem is that they are still shrinking their balance sheets or increasing their capital—or both—long after their U.S. rivals have made these adjustments.”

So regardless of whether Basel III is ever finalized or Basel IV actually becomes reality, remember it is not just the details of the reforms that matter, but also the speed with which they are implemented.

A Tale of Two Exchanges

Philip Stafford over at the FT Trading Room offered up an excellent tick-tock of the troubled merger attempt by Deutsche Boerse and the London Stock Exchange.

Not-So-Super Uber

Uber hasn’t had the best year.

  1. First users flocked to other options like Lyft when Uber botched its handling of the travel ban chaos at JFK airport (Did we ever figure out if Uber was doing  a shady thing to grab market share or just trying to do a kind and virtuous thing?).
  2. Then a former Uber engineer penned a blog post that smashed Uber’s corporate culture and its handling of sexual harassment complaints.
  3. Then news broke that Uber Founder and CEO Travis Kalanick was foolish enough to get mixed up in an argument with an Uber driving about pricing … on camera … after dancing awkwardly … also on camera … with two lady “friends” on Super Bowl Sunday.
  4. Today the firm is reeling from a New York Times article that details how it uses its prevention program, known as Violation of Terms of Service or Greyball, to elude local authorities trying to catch Uber drivers operating illegally.

That is FOUR merde-storms in a little more than two months!

And when I think of how poorly ALL these stories have been handled by Uber, I think back to this Recode piece from less than a year ago that detailed the internal communications shakeup conducted by Rachel Whetstone, who had been in the role of SVP of Public Policy and Communications for less than a year at the time. Sure, Uber has always been in the headlines for its brash, disruptor approach to business. The difference is those headlines and stories used to slant toward supporting Uber. Now they don’t.

WYWW Appetizers

Weekend Reading

Are central banks killing yields on long-term government bonds?

A speech today by Bank for International Settlements Economic Adviser and Head of Research Hyun Song Shin looked at the impact monetary easing has had on the yield for long-dated government bonds. Research by Shin and his colleagues at the BIS found that “as monetary easing pushed interest rates to record lows, strong demand for long-dated bonds from insurers and pension funds may have put more downward pressure on yields, potentially creating a vicious circle.”