The US is acting more and more like a banana republic with every passing day. One of the characteristics of a banana republic is that it puts out flattering-to-the-point-of-being-unreliable data about its economy and important institutions. Alert reader James Bianco pinged us about a new SEC release today and Floyd Norris of the New York […]
Read more...A reader sent this note by AIG’s Bernard Connolly, which is surprisingly blunt for a sell-side analyst: In saying today that the housing price correction must be allowed to proceed, Paulson is in effect calling for a massively weaker dollar – athough he probably does not realise it. Of course it is true, as Paulson […]
Read more...Two related sightings on Bloomberg, First, Deutsche Bank says it will fall short of its profit targets: Deutsche Bank AG, Germany’s biggest bank, said the U.S. subprime collapse and slowing economic growth will make it harder to reach a full-year profit goal. Deutsche Bank fell as much as 2.9 percent in Frankfurt trading after it […]
Read more...CR at Calculated Risk yesterday pointed to an important sign of improving conditions in the credit markets. The fever chart of the so-called third wave of the liquidity crunch, the TED spread, showed signs of improvement. The TED is difference between the interest on three month Treasuries and Libor; the earlier acute episodes were August-September […]
Read more...As Senator Everett Dirksen once said, “A billion here, a billion there, and pretty soon you’re talking real money.” Although the powers that be have relied mainly on guarantees and loans rather than explicit payment to try to prop up financial institutions and the housing market, the same principle applies. Even though these commitments are […]
Read more...A hedge fund correspondent pointed us to an article at Institutional Risk Analytics on the Bear-JP Morgan deal. While we don’t subscribe to its view that Bear was “raped” (please, the firm was going to file for bankruptcy a week ago Monday), it contains an intriguing analysis of JP Morgan. Differing with popular opinion, IRA […]
Read more...Well. at least we have a new addition to the finance scene that isn’t an acronym. A zombie deal is what happens when a LBO transaction with a cov-lite loan goes bad. Recall that “cov-lite” was a sign of how frothy lending conditions had gotten. Just think, a mere year ago, a private equity firm […]
Read more...Andrew Ross Sorkin in the New York Times provides some important background on how the Bear deal wound up being retraded today. But he does his readers and the greater public a huge disservice by telling the story so as to flatter Wall Street. According to Sorkin, the $2 price for Bear was the Fed’s […]
Read more...What a complete and utter fiasco (see earlier post for background). And you have to get a load of the face-saving. No official acknowledgment of the legal screw-up that made this retrade necessary. Note there is no mention of any change in the Fed’s, role, something that was rumored earlier. This will not go down […]
Read more...The comments in the Financial Times by Yoshimi Watanabe, Japan’s financial services minister, are extraordinary. He ventured to give the US advice on its credit crunch based on Japan’s experience during its post-bubble-years banking crisis. And it’s not pretty. Why are these remarks so unusual? Consider: Most countries don’t give other countries advice on how […]
Read more...This is the nuttiest situation I can recall in some time in deal land, assuming the rumor in the New York Times is true. The Grey Lady reports that JPM is working to increase its offer for Bear from $2 (well, roughly $2 since it is a stock-for-stock deal) to $10. Yes, Bear’s stock price […]
Read more...There are two useful but frustrating articles addressing different aspects of the extraordinary measures implemented by the Federal Reserve in the last ten days, in particular the bailout of Bear Stearns. A New York Times article, “What Created This Monster,” is very much worth reading despite its shortcomings. It attempts to say how we got […]
Read more...A nice recap in the Guardian of how far underwater the various sovereign wealth funds are on their investments in large Western financial institutions. The tally is not pretty. It isn’t simply that the losses are large in percentage terms, but the falls came fast, making the buyers look like chumps. And these were high […]
Read more...If you read between the lines of the Financial Times story that served as a point of departure for a post earlier this evening (“Desperate Central Bankers to Bail Out MBS Market?“) it was clear that the Bank of England was the most keen to shore up the wobbly mortgage securities market. This New York […]
Read more...I quoted Lucy Kellaway, who once said (apropos management fads), “No idea is too ridiculous to be put into practice,” and warned that the credit crisis would soon get that sort of treatment. A story in the Financial Times indicated we are getting closer to that stage: Central banks on both sides of the Atlantic […]
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