Apologies for the high concentration of monoline items tonight, but that’s where the meatiest material is right now. I received a surprising e-mail from an investor on a rumor he heard from a well-placed source. He was a bit incredulous as to what he was told, and I am skeptical too. Nevertheless, I thought it […]
Read more...It is truly amazing how disconnected credit instruments are from other tradeable financial investments. The Fed released the minutes from its latest Open Market Committee meeting, which lowered the growth forecast and increased the inflation forecast. That shouldn’t be cheery at all; the stagflationary 1970s were a terrible time for equity valuations, but the US […]
Read more...A good article “Markets assess the costs of a monoline meltdown,” by Aline Van Duyn and Gillian Tett of the Financial Times, endeavors to put the bond insurance crisis in context. While some of this will be familiar grounds to readers, the piece does a nice job of putting together some key data. The article […]
Read more...As reported by Bloomberg, Bill Ackman of Pershing Square weighted in with his own breakup proposal today. Details there were sketchy, but a reader sent me a pdf of Ackman’s PowerPoint presentation. One slide points out something we have been saying: Berkshire Hathaway’s proposal would require a payment over and above the premiums paid by […]
Read more...Standard Chartered abandoned plans to support its SIV, which is already in receivership. It is likely to default on its February 15 payment (it has three business days to cure the default). While this development is not expected to hurt either the bank or the marketplace, it’s another indicator that some institutions are less concerned […]
Read more...Two pieces today in the Financial Times address the striking disparity in sentiment and prevailing valuations between the credit and equity markets. Debt market investors are (for the most part) acting as if the floor might collapse beneath them, while equity investors are talking as if the downturn is coming to an end. And interestingly, […]
Read more...This post by Christian Weller at Credit Slips, takes a different viewpoint than, say, that of those in the Nouriel Roubini camp who see an apocalyptic meltdown as possible, and a mere severe recession as possible. Weller instead argues for a scenario more like that of Japan: a grinding period of low growth, falling real […]
Read more...It appears MBIA’s board did not have the appetite for a showdown with Sptizer and Dinallo over a breakup, which they threatened to implement whether the bond insurer dooperated or not. It is going to be interesting to see how this goes down with Warburg Pincus, which made a huge bet on MBIA due to […]
Read more...Ever since Eliot Spitzer threatened the troubled monoline insurers that he’d break them up, everyone has acted as if that’s a viable option. But this talk of a split reminds me of movies about Hollywood, where someone buttonholes a producer with his pet idea: “See, it’s like Flashdance, except you reverse it: the girl is […]
Read more...The pain and the costs of the dislocation in the auction rate securities market only continues to rise. In case no one has yet said this clearly enough, this product was a disaster waiting to happen. The idea that one is going to fund long term obligations in a short term funding market is nuts, […]
Read more...Ah, another quarter, another set of writedowns by financial firms, or so it goes these days. There have been various sightings of new source of acute pain: leveraged loans, commercial real estate, auction rate securities. So far, analysts have been mainly talking about each problem separately, but as earnings season approaches, they are now considering […]
Read more...We’ve been saying that the legal basis for splitting up the bond guarantors and preferring one group of policyholders (municipalities) over everyone else seems pretty dubious and therefore is likely to trigger litigation. Analysts at Bank of America agree. From Bloomberg: Regulators’ plans to break up bond insurers into “good” businesses covering municipal debt and […]
Read more...Fedwatcher Tim Duy (posting on Mark Thoma’s Economist’s View) read Bernanke’s recent Congressional testimony as saying that further rate cuts really weren’t warranted give the Fed’s medium term forecast. However, Duy has muffed some calls before by assuming that the Fed would stick by its official pronouncements rather than be swayed by the baying of […]
Read more...Those of us who have an eye for trouble have been nattering about the credit default swaps market from time to time. This $46 trillion unregulated market has suddenly captured the imagination after AIG reported in an 8-K filing that it had certain weaknesses in its internal controls and that the value of its credit […]
Read more...Doug Noland at Prudent Bear provides a weekly Credit Bubble Bulletin which includes commentary after his extensive news digest. This week’s report was comprehensive and sobering. While his writing style tends toward the apocalyptic, his message is clear and persuasive: the credit market crisis is worsening, damaging more and more institutions and crippling more and […]
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