UK Banks Face Scandal Over Toxic Insurance Products

(Reuters) – When businessman Colin Jones approached his local bank for a loan in 2007, he had little idea what an “interest rate swap” was, let alone a “structured collar”.

Jones wanted 400,000 pounds ($630,000) to buy a small hotel in North Wales and Royal Bank of Scotland said he could have the money if he also took out a swap – a form of insurance designed to protect him from a rise in interest rates.

Like a growing number of small business owners in Britain, Jones now regrets signing up. His hotel was repossessed in July last year after a sharp drop in rates during the financial crisis pushed charges on the deal to an unaffordable 30,000 pounds a year, the same as the repayments on his loan.

“I’ve lost my house, my wife and I have separated, I lost my self respect and I lost the respect of my local community because they don’t see what’s going on in the background. People just assume that you’ve done something wrong,” Jones said.”

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Down 2.2% as we speak.

“U.S. stocks haven’t ended their bull run. Far from it, says Byron Wien, Blackstone Advisory Partners Vice Chairman.

“I see us going to 1,500,” Wien told CNBC. “We won’t go in a straight line — it might be a saw-tooth pattern — but I think we get there by year’s end.”

The index is currently trading around 1,414.”
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“Applications for U.S. home mortgages tumbled last week, with demand for refinancing drying up as mortgage rates jumped to their highest level since late June, data from an industry group showed on Wednesday.”

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“Online payments provider PayPal will gain access to millions of physical stores in the U.S. under an agreement with Discover Financial Services.

Aldan Crawley | Bloomberg | Getty Images

Under the deal, unveiled on Wednesday, PayPal will issue payment cards to its more than 50 million active users in the U.S. next year.

The cards will let PayPal users buy from merchants that already use Discover Network, a payment network with more than 7 million U.S. retail locations.”

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“Federal authorities in the U.S. are investigating Royal Bank of Scotland for possible breaches of Iran sanctions in a probe that has already led to the departure of a senior risk manager.

Getty Images The Royal Bank of Scotland Headquarters

The U.K. bank [RBS  7.46    0.01  (+0.13%)   ] is being probed by the Federal Reserve(explain this) and Department of Justice after volunteering information to them and U.K. regulators about 18 months ago, several people close to the situation said.

The bank uncovered the alleged failings after Chief Executive Stephen Hester initiated an internal review not long after his arrival three years ago.”

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“Nomura’s Andy Chaytor, Kevin Gaynor, and Bob Janjuah have a new note just out titled Time To Set Risk-Off Trades.

In English that just means: SELL!

The note is a followup to Janjuah’s bearish note yesterday, which predicted a selloff that goes through November. Note that this is not the ‘House View’ but rather the view specifically of Chaytor, Gaynor, and Janjuah.

After the big rally we’ve seen in equities (Europe and the US), risk currencies, and European government bonds, “risk off indicators proliferate” in their view.

What are some of these indicators?

One is simply: The S&P divided by the VIX, a crude measure of optimism combined with complacency. Suffice to say, it’s very high on a historical basis.”

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“Russia became the 156th member of the World Trade Organization after completing almost two decades of negotiations, bolstering President Vladimir Putin’s efforts to gain greater influence in global affairs.

Putin returned to the Kremlin in May for a third term, seeking annual growth of about 6 percent to turn the $1.9 trillion economy into one of the world’s five largest by purchasing power. He is also championing a bigger role for Russia and other leading emerging-market nations in navigating the global economy, saying richer countries failed to contain the debt crisis.”

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Currently oil is off a fraction, but had some upside action overnight on geopolitical and supply risks.

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“The dollar and yen strengthened after Japan reported a wider-than-estimated trade deficit in July, underlining the fragility of the global economy and boosting demand for safer assets.

The U.S. currency rose the most against the South African rand and Swedish krona after Federal Reserve Bank of Chicago President Charles Evans described a weakening in global trade as “awful.” The euro extended losses against the dollar as Luxembourg Prime MinisterJean-Claude Juncker travels to Greece to discuss the nation’s austerity plans. Australia’s dollar fell as stock declines sapped demand for for higher-yielding assets.

“We’ve had the disappointing Japanese trade data and the dollar is a bit stronger,” said Jane Foley, a senior currency strategist at Rabobank International in London. “The Fed minutes will be closely watched. The dollar will come down if they signal that they will take action.”

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Gapping up

KTCC +15%, HNSN +10.7%, LZB +6.7%, WSM +5.9%, DEG +5.9%,

NOK +5.1%, FITB +3.5%, CS +1.7%, DB +1.6%,  CX +6.1%, YELP +2.5% ,

CNP +0.4%,  ZNGA +2.4% ,  LO +0.5%, BKD +10.5% , FVE +7% ,  ATPG +13.8% ,

Gapping down 

UCTT -17%, AONE -12.9%, MCC -4.6%, DELL -4%, CECO -3.7%, INTU -2.8%, CTL -2.1%,

CVI -1.1%, GSK -1.2%, CLWR -2.8% ,  BBY -1.7% ,  CTL -2.1% , MCC -4.6%,  CECO -3.7% ,

HPQ-2.2%,

In Play ,

On the Wires 

AES, BBY, CZR, CX, CNP, CSIQ, CLWR, CEO, CCH, DELL, GSK, LPS, MOS, NGLS, TSL, ZNGA,

Full report 

World Markets

Currencies

Commodities

USD Libor

Euribor

Yields for Italy, Spain, France,  and Germany …

Peter Thiel should be embarrassed. He’s a director on the Facebook (FB) board. He turned a $500,000 investment in Facebook from 8 years ago into $1 billion. More power to him. God Bless America. None of that is cause for shame.

What is embarrassing is that he has just liquidated 89% of his holdings in Facebook within the last 3 months. Back in May, he owned 44 million shares in the social media company. He sold more than half of that in the initial IPO at $38. Two days after that IPO, when the stock slipped below that offering price, he put in place an automated selling plan in place that would allow him to sell a lot of his stock in the future without fear of being howled at for being an insider dumping shares. That’s because he could just say he’d filed this automated plan for selling purposes.

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August

September

October

Where the money has been flowing:

Here is your nightly list of hybrid movers under $10, click here for charts.