Wall Street Breakfast

Author: bmotrader   |   Latest post: Fri, 15 Oct 2021, 10:14 AM


Wall Street Breakfast: Bitcoin Business

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The SEC could decide as early as Monday to allow American ETFs to hold Bitcoin (BTC-USD) futures, making it easier for small investors to gain exposure to the cryptocurrency. The agency is facing a Monday deadline to decide whether to approve or deny a filing by ProShares to launch a ProShares Bitcoin Futures ETF. Several other ETF firms have also filed to launch similar funds and will be watching closely to see whether regulators green light ProShares' plan.

Snapshot: Many investors have been anticipating the ability to trade crypto assets through exchange traded funds, but the SEC has yet to allow ETFs to directly hold things like Bitcoin. In the past, the agency has cited investor hazards like liquidity, manipulation and extreme price swings. The list of issuers that are currently anticipating the approval include names such as Valkyrie, Galaxy Digital, VanEck, ETF Series Solutions, ARK Invest, Invesco and ProShares.

"Before investing in a fund that holds Bitcoin futures contracts, make sure you carefully weigh the potential risks and benefits," the SEC wrote in a tweet late Thursday. "Check out our Investor Bulletin to learn more."

Movement: All the hype is adding to bullish crypto sentiment as Bitcoin traded up 3% overnight to over $59,000. At that level, the token has doubled in value this year and is near April's record high of $64,895. While the proposed Bitcoin-futures ETFs won't invest directly in crypto, issuers aim to trade futures contracts based on Bitcoin.

Aviation - Indicted for MAX fraud

Mark Forkner, chief technical pilot of the Boeing (BA) 737 MAX program, has been indicted by a federal grand jury in Texas for allegedly deceiving safety regulators which had been evaluating the plane before its approval. As a result of a series of missteps, two MAX crashes occurred in late 2018 in Indonesia and early 2019 in Ethiopia that claimed 346 lives. While the pilots tried to regain control of the plane, both went into fatal nosedives minutes after taking off.

Backdrop: The "Maneuvering Characteristics Augmentation System" was a flight stabilizing program developed by Boeing that became notorious for its role in the fatal accidents. MCAS mitigated the MAX's tendency to pitch up during certain maneuvers - because of the aerodynamic effects of its larger CFM LEAP-1B engines - though Boeing requested the FAA remove its description from aircraft manuals (leaving pilots unaware of the new system when the jet entered service in 2017). Meanwhile, the decision allowed the MAX to be certified as another 737 version, which appealed to airlines due to the reduced cost of pilot training.

737 MAX jets were grounded worldwide for more than a year and a half following the deepest corporate crisis in Boeing's history. The FAA only approved the plane for flying again late last year after company made changes to MCAS. In January, Boeing also agreed to pay more than $2.5B in fines and compensation after reaching a deferred prosecution agreement with DOJ over the MAX crashes, which cost the company a total of more than $20B.

Justice comes knocking? Forkner is expected to make an initial court appearance today in Fort Worth, Texas. He faces a maximum penalty of 20 years in prison for each of the four counts of wire fraud, and 10 years in prison for each of the two counts of fraud involving aircraft parts in interstate commerce. That could mean decades behind bars if convicted.

Tech - LinkedIn reevaluates China

Microsoft (MSFT) is shutting down the Chinese version of LinkedIn, effectively turning out the lights on the last major American social media provider operating in the country. Beijing had once touted the model, which involves a partnership between LinkedIn and Chinese nationals who actually own the platform, as a way for American tech giants to access its market. However, the framework didn't allow overseas headquarters to have too much control over the Chinese operations, making it an unpopular choice in Silicon Valley.

Behind the decision: "While we've found success in helping Chinese members find jobs and economic opportunity, we have not found that same level of success in the more social aspects of sharing and staying informed," LinkedIn said in a blog post. "We're also facing a significantly more challenging operating environment and greater compliance requirements in China."

Back in March, LinkedIn temporarily paused new member sign ups in China to ensure it complied with local law. China's internet regulator also told company officials to better regulate its content and gave them 30 days to do so. Since then, LinkedIn has notified a number of China-focused activists, academics and journalists that their profiles were being blocked for containing prohibited content.

Going forward: "Our new strategy for China is to put our focus on helping China-based professionals find jobs in China and Chinese companies find quality candidates. Later this year, we will launch InJobs, a new, standalone jobs application for China. InJobs will not include a social feed or the ability to share posts or articles. We will also continue to work with Chinese businesses to help them create economic opportunity."

Financials - Bank earnings

It's been a solid first week of Q3 earnings so far as the largest U.S. banks posted another robust round of quarterly results. A rebounding economy allowed lenders to release more cash they had set aside for pandemic losses, while equity financing and trading boosted bottom lines. Don't forget about the deal bonanza that continued to ring the register for the banks' Wall Street operations, with a hefty quarter for mergers-and-acquisitions fees.

JPMorgan (NYSE:JPM) - Q3 net interest income of $13.2B, driven by balance sheet growth and higher rates, while Asset & Wealth management net revenue came in at $4.3B (+5% Q/Q and +21% Y/Y).

Bank of America (BAC) - Regained the organic customer growth momentum it experienced before the pandemic, as well as reporting a record quarter for M&A transactions.

Wells Fargo (WFC) - Consumer Banking & Lending net income of $2.5B climbed 15% from Q2 and 181% from Q3 2020, while total outstanding loans were down from a year ago, but up from the previous quarter.

Citibank (C) - Spending on Citi credit cards rose 20% Y/Y to a record and continued climbing from the summer, though "strong consumer balance sheets impacted lending."

Morgan Stanley (MS) - Topped expectations as investment bankers scored their best quarter ever, with the division posting a 67% increase in revenue to $2.85B.

Commentary: "The banks painted a strong and healthy picture of the U.S. consumer," said Edward Moya, senior market analyst at Oanda. "Wall Street can't turn negative on the economy after seeing reserve releases, moderating trading revenue, mixed loan growth, and a consumer willing to take on debt."


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