Rating agency Moody’s forecasts that the economic slowdown will start to show up in markedly higher junk bond defaults. Note that, thanks to LBOs, nearly half the corporate issues outstanding are now rated junk. That means a normal cyclical deterioration in weaker credits will affect a larger proportion of corporations than in the past. From […]
Read more...I saw this piece by Wolfang Munchau, “The credit revolution looks to the long-term,” last night, and every time I’ve thought about what to say about it, I’ve gotten unusually foggy headed (of course, some readers may contend that I am always foggy headed and am merely having an atypical spell of self-awareness). I think […]
Read more...Ray Dalio, founder and chief investment officer of Bridgewater Associates, is no doubt far from alone in being someone whose opinion is solicited by the Fed. Nevertheless, in an interview in today’s Financial Times, he takes a position diametrically opposed to conventional wisdom. He argues that the remedy for our current economic, particularly credit, woes, […]
Read more...Even though interbank rates have come down, in all likelihood due to the operation of the Fed’s Term Auction Facility, Treasury prices indicate that investors are still worried about credit and counterparty risk. This may in part be a reaction to the losses suffered by enhanced cash funds and money market funds (although the latter […]
Read more...Merrill Lynch is under investigation in Massachusetts for having sold some CDOs that fell 91% in value in less than a year to Springfield, a municipality that was just getting out from under its own fiscal woes. The amount at issue isn’t large by Wall Street standards; the CDOs in question fell by $13 million. […]
Read more...Credit default swaps are insurance against defaults, and can be written on specific entities or on indices. Higher CDS prices mean the protection sellers require higher payments to assume the default risk. CDS prices increased sharply this week for the logical suspects, namely, commercial banks with substantial real estate exposure and homebuilders. From Bloomberg: The […]
Read more...Although a robin does not make a spring, the increase in ABCP outstandings is the first sign of improvement in the market for asset backed paper in quite some time. The required spread over 30-day Libor also improved dramatically. From Bloomberg: For the first time since the August freeze in the credit markets, companies issued […]
Read more...John Plender of the Financial Times warns us that the movement of assets from shaky players to the solvent has only just begun. Those who complain of crown jewels begin sold to foreigners had better get used to more of the same. Plender points out that investors are taking real risks, not merely that their […]
Read more...As the US government has sponsored various plans to forestall the recognition of real estate related losses, ranging from the failed SIV bailout program to New Hope Alliance subprime rate freeze program to proposals to raise Freddie Mac and Fannie Mae’s mortgage ceilings, it has begged comparison to Japan in the post-bubble years. Even though […]
Read more...The Financial Tines and the Wall Street Journal feature two treatments of the same theme, investors looking to pick up bargains in companies damaged by the subprime implosion. The Financial Times discusses the interest of the Kuwait Investment Authority in acquiring stakes in financial services firms; the Journal article is aimed at retail investors that […]
Read more...The Financial Times’ Tony Jackson admits to having come to a bearish propensity from having trained under the dour Scots, but nevertheless thinks that pessimists, at least as far as the near-term economic outlook is concerned, may have a point. Jackson goes through a quick and dirty list of Things That Could Cause Trouble. While […]
Read more...The Financial Times reports that both institutional cash funds and money market funds, which are subject to more stringent requirements, are getting cash injections from their managers to offset losses. The story points out that not all salvage operations are made public, so the total is no doubt higher than the level cited in this […]
Read more...The theme du jour, at least in the world of Dow Jones, is the sorry condition of the financial services industry. While the basic thrust is nothing new, some of the data point are revealing. The Journal’s Heard on the Street column tells us that banks like Citigroup and HSBC are likely to sell business […]
Read more...We had a story earlier this morning on hard times in the financial services industry, but this merited separate comment. There is no institutional memory on Wall Street. In superheated M&A markets, investment banks start providing bridge loans even though they should know better. Inevitably, the party ends, credit markets back up, and the securities […]
Read more...Goldman’s William Tanona predicts further sizable losses at major brokerage firms, with Citi and Merrill taking particularly large hits. Tanona also expects Citigroup to cut its dividend. From Bloomberg: Citigroup Inc., JPMorgan Chase & Co. and Merrill Lynch & Co. may write down an additional $34 billion in securities linked to the collapse of the […]
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