Ooh, when it rains, it pours. First Bear, now this. However, readers of this blog will know we have been posting for some time on rampant liquidity, inadequate risk premia, lax lending, and overvalued assets every where you look. We thank Michael Panzner of Financial Armageddon for pointing out this story from the UK’s Telegraph. […]
Read more...In case you missed it, the US stock market was rattled by the continuing aftershocks of the Bear Stearns subprime-related hedge fund fallout, with the Dow down 185, and Bear itself was down in line with the Dow (both fell 1.4%, although Bear was up slightly in the aftermarket at this hour). Now the odd […]
Read more...One of the reasons the US market traded down today was fears the LBO boom is coming to an end, and support for that thesis came in a Bloomberg story, “Thomson Learning Shows `Breaking Point’ for Junk Debt.” Three deals, Thomson Learning, US Foodservice, and Dollar General, are having trouble finding lenders on terms recently […]
Read more...A solid piece, “Collateral value thrust to the fore by woes at Bear Stearns,” by capital markets editor, Gillian Tett of the Financial Times. It’s inherently difficult to value assets that don’t trade often (think of art), yet dodgy CDO paper has already been valued as colleteral so loans could be made against it. Some […]
Read more...It continues to be lively on the Bear Sterns front. As readers doubtless know, two Bear Stearns sponsored hedge funds run by Ralph Cioffi that focused on subprimes had trouble meeting margin calls and went into liquidation. On the one hand, the Wall Street Journal appears not to be putting it on the first page […]
Read more...In a MarketWatch story that was ostensibly about the continuing saga of the Bear Stearns hedge fund implosion comes a juicy tidbit about the composition of subprime loans. It turns out half weren’t even for housing purchases but to refinance other debt: Subprime loans are made to less credit-worthy borrowers at higher rates. It’s a […]
Read more...OK, the headline may be exaggerating, but not by much. A Bloomberg article titled, “Bernanke, Trichet Turn to BIS as Markets Ignore Risk,” discusses how central bankers are finding the Bank of International Settlements an increasingly important forum for exchanging ideas and intelligence. What is distressing yet not surprising is the central bankers’ acknowledgement of […]
Read more...Martin Wolf has an excellent story today in the Financial Times, “Unfettered finance is fast reshaping the global economy,” in which he describes the change from “managerial capitalism” to “global financial capitalism.” Wolf takes pains to avoid taking sides on whether this development is a good thing or a bad thing, but one senses that […]
Read more...Steve Rattner, best known as the heir apparent at Lazard Freres who overplayed his hand, and is now the head of a private equity firm, Quadrangle Partners, wrote a rather curious piece, “The Coming Credit Meltdown,” that ran in Monday’s Wall Street Journal (apologies for being on the late side in posting it). The odd […]
Read more...Below is an excellent post by Barry Eichengreen, Professor of Economics and Political Science at UC Berkeley, at the new blog VoxEU. The post posits that the biggest risk to Asia is an asset crash, and looks at America’s experience during its industrializing phase to see what lessons might be learned. He determines that whether […]
Read more...An article, “Better Deeds,” by Doug Smith at Slate tells us that, contrary to popular opinion, one group of subprime mortgage lenders has done well with the product and is experiencing default rates comparable to that of prime mortgages. And no, they aren’t seeing rising arrearages either (generally speaking, mortgage defaults and foreclosures track the […]
Read more...We have mentioned before that the CDO market, a dark, murky, but rapidly growing part of the financial markets, is looking dodgier by the day. A brief primer: CDOs resemble other structured credits, like mortgage backed securities, in that they are structured into tranches of varying credit quality and maturities. The top tier is often […]
Read more...I am clearly showing my age. I am mystified watching both the Fed’s and the banking industry’s reluctance to tighten up on lending practices in subprime home loans. One would think this situation would, handled correctly, represent an opportunity for bankers. They have lost share to mortgage brokers, who were more lightly regulated and appear, […]
Read more...The funny thing about the oft-repeated George Santayana saying, “Those who cannot remember the past are condemned to repeat it,” is that it is generally applied to historical events, like the folly of launching an attack on Russia that might extend into the winter. But these days, in the financial markets, with so many people […]
Read more...This Bloomberg story cites Federal Reserve research efforts that found that blacks and Hispanics were more likely to wind up with costly mortgages than whites. Even though this work is three years old and strong enough that FDIC chairman Shiela Blair says she is troubled by the data, no regulator has yet to take action. […]
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