Monthly Archives: July 2007

Credit Default Swaps Put Goldman, Merrill, Lehman and Bear at Junk Levels

Credit default swaps prices have risen sharply all over the globe. Nevertheless, the CDS related to the debt of major Wall Street players have been particularly hard hit, which isn’t surprising, given their LBO financing commitments, exposure to hedge funds via their prime brokerage operations, and falling profitability. Some experts, however, think the CDS are […]

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The Credit-Equity Market Disconnect

European and Asian equity markets performed well overnight, and according to the futures market, US stocks are set to have a good day as well. Yet the credit markets are in a state of near-panic. Some illustrative factoids and comments from the Financial Times: “It is nothing short of ugly in credit land,” said Alan […]

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The Shellacking of Greenspan Begins

Ah, this is one of those days where there way too many good points for departure for commentary and here I am with a pricey and pokey Internet connection, and competing holiday activities. Finally, the reassessment of Greenspan’s tenure has begun. Not surprisingly, the Brits are more pointed in their critique. From “Greenspan has left […]

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Dr. Doom on the Dangers of the Liquidity Boom

Those of you who are long in tooth might remember the days when Dr. Doom, aka Henry Kaufman, chief economist of Salomon Brothers, could move the market. Kaufman was intellectual, articulate, and insightful. I remember as a summer associate listening to his section of the Monday morning meeting at Salomon. You could hear a pin […]

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Paper Points to Problems with CDO Models

A draft of a paper, “Innovations in Credit Risk Transfer: Implications for Financial Stability,” by Stanford’s Darrell Duffie, investigates ” the design, prevalence, and effectiveness of credit risk transfer,” with an eye to implications for the financial system. The paper is worth reading for those seriously interested in the CDO/CLO markets, and sets forth a […]

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Bulls Keeping the Faith (At Least So Far)

According to Bloomberg, in “Bulls Load Up on Stocks in Worst Rout Since 2002 ,” optimistic investors are undeterred. In general, bond markets downturns precede stock market declines, since equity market investors need to be convinced that the signals from the credit markets are valid. In my youth, the lag was usually four months. And […]

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Reading the Tea Leaves (Financial Markets Edition)

At junctures like this, when markets have come a bit unglued and may be undergoing a sea change, making forecasts is as scientific a process as reading tea leaves. And since I am (literally) at sea with pricey satellite access, I’m limiting myself to checking the usual suspect media sources rather than being as comprehensive […]

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Man Bites Dog (Federal Reserve Edition)

The New York Times’ Floyd Norris, in “In This Mess, Finger Pointing Is in Style,” discussed who might be responsible for the subprime woes and included this tidbit: Who’s to blame for the subprime mortgage mess? It’s the lenders, says William Poole, the president of the Federal Reserve Bank of St. Louis. As he sees […]

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Credit Market Woes Weigh on Global Stock Markets

Today’s Financial Times has a good piece on the turmoil in the markets yesterday, which has continued into Asian markets today (although Europe appears to be staging a recovery). There were two noteworthy elements in this article, namely the divergence between the equity and credit market perspectives, the second on Bernanke’s posture. On the first […]

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Ozone a Bigger Culprit in Climate Change Than Previously Thought

An article in Nature magazine, as reported by the BBC, has found that ozone is a more significant greenhouse gas than previously recognized. Ozone interferes with plant photosynthesis, which reduces their effectiveness as a carbon sink. The study estimated that it reduced plant productivity by 14% to 22%, which is a large enough level to […]

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Investors Dump Wall Street Firms’ Stocks and Bonds

We warned earlier that if conditions deteriorated in the financial markets, investment banks were particularly exposed by virtue of their taking on multiple exposures to the same underlying risk. For example, they lend to hedge funds via their prime brokerage operations, and also may be exposed to them by providing credit default swaps on assets […]

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Cat Predicts Patient Deaths

Regular readers know I have limited internet access now by virtue of being (literally) at sea. I checked in and saw the dramatic decline of the equity markets and figured a distraction might be welcome. From the BBC: A US cat that is reportedly able to sense when a nursing home’s residents are about to […]

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