Monthly Archives: October 2007

Martin Wolf is Down on Biofuels

Martin Wolf, the Financial Times’ highly regarded economics editor, has an usually blunt article today, “Biofuels: a tale of special interests and subsidies.” While the main target is the way special interests are turning biofuels into yet another agricultural pork barrel, he makes a number of important observations: biofuels are only marginally cleaner than conventional […]

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Jim Rogers Increases His Bets Against Investment Banks

Famed investor Jim Rogers has been down on the investment banking industry for some time, and thinks there is even more reason to be negative, as a Bloomberg story reports. However, I think George Soros would take exception to the characterization of Rogers as “co-founder” of Quantum. Rogers most assuredly worked for Soros. Note that […]

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A Revealing Subprime Chart

If you want a vivid illustration of why subprimes have turned out to be the mess they are, the graphic below, courtesy Russ Winter who also supplied this explanation: The term used here, “DTI proforma” , measures what debt payments to income on 2005 and 2006 vintage subprime teaser loans would have required if the […]

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Rubin Criticizes Weak Dollar Policy

Robert Rubin spoke out against policies that weaken dollar, from the commonsense perspective that a cheap dollar lowers the US standard of living. That’s a bit simplistic, since the impact of a weak currency on citizens depends on how dependent a country is on imports, and critically, to what degree domestic goods could substitute for […]

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Federal Home Loan Banks Standing in for Commercial Paper Buyers

I had wondered why, given the swift and brutal contraction of the commercial paper market in August and September, that there weren’t more apparent signs of distress. Outstandings fell an eyepopping $368 billion. Commercial paper is short-term borrowings, maximum 270 days, but typically much shorter. If a borrower can’t roll his commercial paper but still […]

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Arguing Against a Rate Cut

Despite the widely-held view that the Fed will lower the Federal funds rate another 25 basis points this Halloween, some continue to argue against further reductions. We’ve taken that position here before, and will recap some of the reasons. The 50 basis point cut in September was a pre-emptive strike, based not on evidence of […]

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Worries About Monoline Insurers Grow

Monoline insurers, such as MBIA, Ambac, and FGIC, are in the business of providing financial guarantees. And one of the products they got involved in guaranteeing was mortgage-related structured credits, much to their peril, as we noted back in August. As subprime losses have mounted, so too have worries about the ability of these guarantors […]

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Is Merrill in Peril?

At this juncture, the question of “Whither Merrill?” is largely rhetorical. We won’t know for certain until the fourth quarter results come in, and for all firms, those are likely to be telling. However, consider the following: Some securities analysts already estimate that based on further deterioration in the mortgage markets since September 30, Merrill […]

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More Doubts About Hedge Fund Performance

Hedge funds charge vastly higher fees than other money managers because they allegedly deliver better investment returns. Yet when you look at most hedge fund indices, they don’t look much better, and are sometimes worse than simple long-only strategies. And remember these indices almost certainly overstate performance, since they exhibit what is called “survivorship bias.” […]

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