"Yesterday - All my troubles seem so far away"

Bank Stocks Lead Market Gains

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By PETER A. MCKAY and DONNA KARDOS YESALAVICH

Stocks pushed higher Tuesday on the backs of financial, energy and materials shares, as investors went back to betting on a global recovery after a slight pullback Monday.

The Dow Jones Industrial Average was recently up 47 points, or 0.5%, trading around 9826, helped by a gain of 3.6% for J.P. Morgan Chase and 2.9% for Caterpillar.

The Nasdaq Composite Index gained 0.4%. The S&P 500 added 0.6% as its financial sector jumped 2.2%, while its energy and materials categories each increased more than 1%.

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Among the biggest winners in the financial sector on Tuesday were bond and mortgage insurers. MBIA leapt 24% and rival Ambac Financial Group posted a 18% gain. Troubled mortgage insurer Triad Guaranty rose 14%,MGIC Investment rose 7% and Radian Groupwas up 5%.

The insurers that rose the most generally had substantial short-seller interest, suggesting that the recent price rise for the group may have put some pressure on short-sellers to cover their positions.

Further helping stocks, especially energy companies, oil futures closed up $1.84 to reclaim their perch above $71 a barrel, with some traders placing early bets ahead of inventory data due out Wednesday.

Art Hogan, chief market analyst at Jefferies & Co. in Boston, said the stock market seems to be taking its cues from commodities on Tuesday, not the other way around.

"The economic data we've seen lately have been OK, as far as the stock market is concerned," said Mr. Hogan. "But they're not a major plus or minus. Really, there aren't a lot of catalysts out there except for what's happening with the dollar and commodities."

The gains came as the Federal Reserve began a two-day meeting on interest rates. While investors will look for hints about possible tightening by the central bank in its policy statement Wednesday, the consensus is that no move is imminent. Confidence that the Fed and many of its overseas counterparts will keep rates low has fueled a steady stock rally this month.

Low interest rates effectively increase the supply of money in the global economy. That dynamic helped to weigh on the dollar Tuesday, which in turn boosted the prices of commodities traded globally in dollar terms.

The euro hit a fresh 2009 high, topping $1.48 for the first time this year. The greenback was weaker against every other major currency in recent action.

Currency analyst Joe Trevisani of FX Solutions in Saddle River, N.J., said the dollar's slide could continue and take the euro past $1.50 in short order, fueled in part by an increasing trend in which speculators are using the dollar as a low-interest vehicle to fund "carry" trades in higher-yielding investments.

"There's no sense in the [currency] market that there will be a change in Fed policy," which could quickly make carry trades unprofitable, Mr. Trevisani said. "The stock market is signaling that we'll have a recovery in six months, but we're seeing some real doubts about that coming in elsewhere."

Gold, a traditional investor safe haven, gained $12.50 to settle at $1,014.20 per ounce in New York, close to its exchange record of $1,018.90.

Treasurys stayed within their higher morning ranges following a well-received auction of two-year notes. The auction saw healthy demand with a bid-to-cover of 3.23, well above the 2.98 average of the last four auctions. The yield came in at 1.034%, in line with rates in the when-issued market just prior to the sale.

—Lavonne Kuykendall and Geoffrey Rogow contributed to this article

Smart people at Barclay's!!!

Lehman: Barclays Got an $8 Billion Windfall

Published: Wednesday, 16 Sep 2009 | 4:34 AM ET

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By: Reuters

Lehman Brothers said on Tuesday that Barclays Capital got a $8.2 billion "windfall profit" from excess assets it took control of in the fire sale of Lehman's U.S. brokerage business a year ago.

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In court papers filed in federal bankruptcy court in Manhattan on Tuesday, Lehman claimed that "critical changes" were made to the sale in between the time the sale order was signed and the deal was closed, resulting in Barclays gaining control of assets that Lehman contends were not supposed to be part of the sale.

Lehman [LEHMQ  0.155    0.02  (+14.81%)   ] filed for bankruptcy on Sept. 15, 2008, in the largest U.S. bankruptcy in history. Its flagship U.S. brokerage business was sold to Barclays [BARC-LN  374.95    5.95  (+1.61%)] less than a week later in a hurriedly-assembled deal.

"Certain Lehman executives agreed to give Barclays an undisclosed $5 billion discount off the book value of securities transferred to Barclays, and later agreed to give billions more in so-called "additional value" that Barclays demanded, but the court never approved," Lehman said in the court filing.

The charges come after Lehman received approval in June to probe whether Barclays got "too good of a deal" when it bought Lehman's brokerage business, as the British bank was able to quickly book a $4.2 billion gain on its $1.75 billion purchase.

Sharon Lorimer

Barclays said at the time that it did not expect the probe to result in any additional claims.

Lehman was allowed to probe Barclays because of the speed with which the deal with Lehman's was reached.

"It's conceivable that mistakes were made," said Judge James Peck of U.S. Bankruptcy Court for the Southern District of New York at a hearing in June.

Lehman alleged in the filing that Barclays had committed to pay former Lehman employees $2 billion in bonuses but never did and "never intended to do so" despite factoring them in to the terms of the sale.

The difficulties with the valuations of assets and liabilities were "exacerbated the fact that many of the Lehman decision makers who 'negotiated' the transaction with Barclays had at the same time been offered lucrative" jobs at Barclays on condition the sale be closed, Lehman said.

"This is an opportunistic claim," Barclays said in a statement on Tuesday. "Now that the economy has begun to stabilize the Lehman Estate is trying to re-trade the deal on the basis of a meritless argument." Lehman is asking the court to amend the deal and a hearing is scheduled for Oct. 15.

The Trustee overseeing the liquidation of Lehman's North American brokerage business and return of assets to customers also said in a statement on Tuesday that "billions of dollars in additional assets" that Barclays claims it owns are "customer property" and were not authorized by the sale.

"The transfer of these assets to Barclays would create an unfair windfall for Barclays at the expense of public customers," James Giddens, the trustee for the Liquidation of Lehman Brothers under the Securities Investor Protection Act said in the statement.

The case is In re: Lehman Brothers Holdings Inc, U.S. Bankruptcy Court, Southern District of New York, No. 08-13555.

Interesting article on "old Lehman" fallout.

How the Global Buyers of Lehman Assets Fared

Published: Friday, 11 Sep 2009 | 8:24 AM ET

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By: Reuters

For Barclays and Nomura, the collapse of Lehman Brothers was the opportunity of the lifetime — a chance to grab a seat at banking's top table as Wall Street's giants fell.

A year after their high-speed takeovers, Britain's Barclays [BARC-LN  370.20   2.20  (+0.6%)] is confident it is on course to fulfil long-held ambitions now it has a foothold in U.S. equity and mergers and acquisitions markets, and Lehman[LEHMQ  0.103    -0.0055  (-5.07%)   ] has already boosted its bottom line.

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But Japan's Nomura, a conservative brokerage which went for Lehman in its own bid to become an international investment bank, is still hobbled by a lack of scale in the United States and insiders say lingering cultural differences are a burden.

"We knew we were crossing a line and we would never be able to go back," Barclays Capital President Jerry del Missier told Reuters, speaking of frenzied negotiations as departing staff carried boxes of belongings across news broadcasts.

Speed was critical for both banks, not least to retain the talent and customer connections in the businesses they bought.

Having failed to buy all of Lehman, Barclays days later acquired its core U.S. broker-dealer out of Chapter 11 bankruptcy protection. Nomura bought European and Asian assets the following week.

A week after Barclays' acquisition, in the throes of the worst market turbulence in decades, it had named its top team. Nomura integrated the new structure in 70 days — much faster than the 100 it had targeted.

Ernie McClellan

"We wanted to send a powerful message to the marketplace that we were going to get the Lehman businesses up and running," Del Missier said in an interview. "We had clients to worry about, our own risk positions we needed to manage — and the environment was incredibly volatile." Nomura declined to comment for this article.

Lucrative Opportunity

The core of Lehman Brothers has allowed Barclays to go from a respected debt shop to a comprehensive investment bank, adding stock underwriting and M&A advisory to the business in a swoop.

Lehman's U.S. equities business was key to that deal — U.S. distribution channels are the largest and critical for anyone selling and underwriting stocks.

It has proved a lucrative opportunity, helping to double pre-tax profit from Barclays investment banking business in the first six months.

"With Lehman you had a ship that had been sailing along very well and one particular thing torpedoed it," said analyst Mike Trippitt at Oriel Securities. "The rest of the business in the U.S. was still buzzing — what Barclays got was a business in which 80 percent was pretty vibrant."

Challenges for Barclays include the huge technological weight of rolling out a single equities platform across the globe, and the task of climbing up the ranks of investment banking league tables as more banks fight over fewer deals.

Since the deal Barclays has taken the number 2 spot in debt capital markets tables, up one place, but it is still below Lehman's old positions in both global M&A and equity capital markets, according to Thomson Reuters data.

Culture Clash

Success has been more measured for Nomura. While areas such as its Japanese franchise, M&A advisory and convertible bonds have shown strength, the bank suffered early on from costs associated with the Lehman deal.

"Looking back at Nomura's financial results for the first quarter, they only managed to show 'some' fruit out of Lehman acquisition," Credit Suisse analyst Azuma Ohno said.

"To me it seems they showed they were able to get a fairly good numbers in a good financial environment, but it was not extremely good." Asia's stock market soared in the first months of the year, with shares in China alone ahead more than 80 percent in early August.

The Japanese bank quickly ran into a challenge that had little to do with speed or execution. Taking on a risk-loving American brokerage proved a tall task. While steps such as Western-style contracts have been taken to improve the cultural differences, issues still pop up.

The U.S. press has relished stories of traders singing company songs or of lessons on serving tea in the Japanese tradition, while rumours of Lehman-only parties have done the rounds in Nomura Asia.

"There are still internal divisions that just won't go away. It's an us vs. them mentality and it's a shame," according to a legacy Nomura banker who did not want to be identified because he was not authorised to speak to the media about the deal.

Sharing client networks is an ongoing problem, he said.

People Power

To keep Lehman bankers through the upheaval, Nomura offered many of them one- and two-year guarantees, based on their 2007 compensation.

The full payout of last year's bonus was due on Sept. 1, prompting speculation that another round of Lehman departures is soon to follow. Nomura has defended the timing of its purchase and has shown it is still willing to hire, even before the markets recovered.

Nomura, which jumped to 4,400 employees in Europe from 1,500 after the acquisition of Lehman's businesses, has hired 521 people in Europe since January, including eight number one-ranked research teams.

"The fascinating thing is that 18 months ago, no one from Goldman or Merrill wanted to work at Nomura," an ex-Lehman executive said, referring to the old-school Japanese image.

"Now they see the opportunity to build something." Still, Lehman bankers have felt under-represented at the top of Nomura's management structure, a feeling that intensified when Lehman's former Asia-Pacific CEO Jesse Bhattal said this summer he would step down from his chairman role at year end.

Progress is emerging though. Nomura's first quarter this year — the three months to the end of June — reversed a year-and-a-half of decline, and teams have cooperated.

"The capital markets team and sales division have worked well with convertibles in terms of distribution. That's actually been an astonishing success," said the legacy Nomura banker.

"In a number of parts we're well positioned. We seem to be missing the boat with some of our businesses. I'd say overall, it's still a work in progress."

Even if the deal for Barclays was a more rounded success, it too still has work to do — not least to grow in Asia and Europe and realise its ambition of taking a top spot in equities and M&A league tables.

Its role as adviser to Pfizer on its $68 billion takeover of Wyeth has helped, but Barclays is number 11 in the global M&A tables, below Lehman's old number 9 spot.

"We are still not up and running in Europe and Asia, and especially in Europe that will have an impact on global league tables," del Missier said. "I am confident you will start to see the results come through pretty quickly."