Bloomberg has come across some correspondence with the SEC that sheds light on Goldman’s much commented upon “net short” subprime position. Note, despite the fulminations of certain members of the media, it is not at all clear that being short creates any liability whatsoever, regardless of whether customers may feel “had” or not. On secondary […]
Read more...Wolfgang Munchau provides nice succinct overview of some of the recent debate surrounding a source of financial system risk that has suddenly captured the popular imagination: credit default swaps. For those new to the concept, credit default swaps are effectively insurance. A protection seller (think insurer) takes the risk of default on a reference entity […]
Read more...Ooof, I am in possession of a hefty and detailed presentation on MBIA and Ambac by an investor that is short the stock of the two holding companies. I believe it is kosher to summarize its findings, particularly since it is all derived from public information. And you probably didn’t want to something that long […]
Read more...The Wall Street Journal reports that Prince Al-Waleed, who salvaged Citi in the early 1990s (its stock was at $9 on its way to zero) is expected to pump equity into the bank again. Note there are some disparities between the Journal’s story and the one in the Financial Times. For example, the Journal says […]
Read more...To be clear, MBI, still rated AA by Standard & Poor’s, and Aa2 by Moody’s, is issuing a hybrid (fixed for five years, then floats) at a yield of 14%, which is consistent with a company at risk of bankruptcy. Note that this deal got off only after investors forced a repricing (hat tip Steve […]
Read more...Yesterday, the Wall Street Journal reported that Merrill and Citigroup were looking for more funding to compensate for pending writedowns. The Journal said Merrill was seeking $3-$4 billion, Ciit $10 billion, and the losses the firms could take on mortgage-related debt could be as high as $25 billion. That number already appears to be out […]
Read more...Forgive comparatively terse comments tonight. The Wall Street Journal reports that Citi and Merrill could have additional losses of up to $25 billion between them and are scrambling to secure foreign funding commitments of $3-$4 billion at Merrill and up to $10 billion at Citi While the article doesn’t say so clearly, the goal is […]
Read more...Hhhm, wonder whether more influential people said privately what we said publicly, that Berkshire’s move into muni bond insurance was a punch in the gut to already reeling bond guarantors. They desperately need more capital if they are to maintain their ratings, which is essential to their business model, but who in his right mind […]
Read more...There are three good and overlapping state of global finance pieces tonight; they all have worthy ideas and I’ll integrate them as best I can. The first is a post by Thomas Palley, “The Subprime – Trade Deficit Connection,” which is a companion piece to th Financial Times article by Stephen Roach yesterday. Roach depicted […]
Read more...The New York Times has an approving story, and the Financial Times a more neutral one, on the fact that New York state superintendent of insurance Eric Dinallo called Berkshire Hathaway’s insurance chief, Ajit Jain, and urged him to enter the municipal bond guarantee business. The license was issued in record time, a bit more […]
Read more...Ooof, things have gone from bad to ugly. Bloomberg reports that the stocks of mortgage insurers MBIA and Ambac plummeted due to an earnings estimate cut by Morgan Stanley and talk of a Countrywide bankruptcy. It goes without saying that these developments imperil the fundraisings the insurers have been told by the ratings agencies they […]
Read more...I wish I had written this piece by Stephen Roach, formerly one of Morgan Stanley’s economists (and noted bear), now head of Morgan Stanley Asia. Roach does an elegant job of drawing connections between some issues that other commentators have treated separately. Roach sees the oft-decried global imbalances (shorthand for countries like China, Japan and […]
Read more...The origins of the phrase “Let them eat cake” are uncertain, but it is generally attributed to Marie Antoinette, and at the time, her proposal wasn’t as loopy as it sounds now. The French peasantry was hungry due to high bread prices resulting from a flour shortage. The queen urged the poor instead to eat […]
Read more...jck at Alea pointed to this deceptively important Reuters story, “Ability to track risk has shrunk ‘forever’ -Moody’s,” which says that financial innovation has created information asymmetries that make it impossible for participants to understand their exposures fully. That position may cynically be seen as a defense of the rating agencies’ poor performance, but the […]
Read more...The Wall Street Journal broke the story that Bear Stearns’ 74 year old chairman James Cayne has told board members he will give up his CEO role but stay on as chairman. 57-year old president and investment banker Alan Schwartz is expected to assume the CEO post. I complained back in November that the Wall […]
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