I am late to this good comment in the Financial Times, “Hold tight: a bumpy credit ride is only just beginning,” by Avinash Persaud. Between the bumpy markets of the day and arcane workings of Conde Nast’s blog entry system, I’ve been a bit distracted. Admittedly, one of the reasons I view Persaud’s piece favorably […]
Read more...This has been an all-round bad news sort of day. And of the bad news, the most troubling is that the carry trade is unwinding. For those of you not familiar with this phenomenon, it consists of borrowing in currencies that have low interest rates and then investing the proceeds in countries and assets that […]
Read more...Fragility seems to be the word on everyone’s lips today. As reported in the Financial Times, UBS market strategist William O’Donnell said that the commercial paper markets had dried up and, “Now the buyers are only interested in Treasury bills.” Overnight, Rams, an Australian home lender that, while not exposed to US subprime, had been […]
Read more...According to Bloomberg, Moody’s has altered investors to the possibility of a repeat of the 1998 Long Term Capital Management hedge fund crisis. We should be so lucky. As we have said before, the LTCM crisis has been widely, and in our opinion, mistakenly seen as a vindication of the workings of the financial system. […]
Read more...It seems to be a symptom of how stressed the markets are that no matter what the Fed does, it doesn’t seem to work. Jim Cramer and others have been clamoring for the Fed to cut rates to give a sop to the credit markets. Bloomberg tells us (and Felix Salmon was on to this […]
Read more...I am more than a bit late to this item, namely, an op-ed piece, “Our Risky New Financial Markets,” by Henry Kaufman in the Wall Street Journal on Wednesday. I’m puzzled at the lack of commentary on this article in the blogsphere. Kaufman, as chief economist of Salomon Brothers during its heyday in the 1980s […]
Read more...Nouriel Roubini, on his RGE Monitor, discusses the distinction between risk (variability in outcomes that can be estimated) and uncertainty (unknown or unmeasurable outcomes). Risk can be priced; uncertainty can’t (or at least can’t be priced by rational agents). Roubini argues that part of the panic in the markets stems from the fact that investors […]
Read more...Although it hasn’t gotten much press coverage, Fitch for some time (see here and here) has been warning of lax lending practices in commercial real estate that sound disconcertingly similar to what we’ve seen in subprime. From a July story in the Wall Street Journal: In a report yesterday, Fitch Ratings said the fervid lending […]
Read more...This is priceless. The Wall Street Journal, in a page one story, “How Rating Firms’ Calls Fueled Subprime Mess,” tells us that rating agencies might have had more than a little bit to do with the problems in subprime. This is a new item? A page one news item? It would be a bigger news […]
Read more...Martin Wolf, the Financial Times’ economics editor, tells us in “In a world of overconfidence, fear makes a welcome return,” that it’s high time that people in the financial markets lost some money, particularly Jim Cramer. Actually, Wolf is characteristically statesmanlike, but the crux of his argument is very much in keeping with Andy Xie’s: […]
Read more...When it rains, it pours. Here many hedge funds are braced for investor redemptions today, just when some banks are starting to refuse to lend against subprime holdings. Now this story isn’t as dramatic as it might seem. It appears that only a few banks have stopped lending against subprime-related debt. And the ones named, […]
Read more...Andy Xie, who until last year was Morgan Stanley’s chief Asia economist (he apparently made himself unpopular by being too candid about Singapore), gives a blunt critique of last week’s liquidity infusions by central bankers in “It’s time for central bankers to stop bailing out markets” in the Financial Times. Xie’s conclusion is that the […]
Read more...Bloomberg reports that analysts at Sanford Bernstein estimate that Citi will suffer up to $3 billion in losses this quarter due to subprime and LBOs writeoffs: The New York-based company may lose between $1.2 billion and $1.5 billion on loans to buyout firms and between $500 million and $1 billion on subprime mortgages in the […]
Read more...An excellent article by Willem Buiter (Professor of European Political Economy at the London School of Economics and formerly a member of the Monetary Policy Committee of the Bank of England and Chief Economist at the European Bank for Reconstruction and Development) and Anne Sibert (Professor and Head of the School of Economics, Mathematics and […]
Read more...Goldman, in a brilliant bit of legerdemain, invested (along with partners such as CV Starr and Perry Partners) $3 billion into its troubled quant fund Global Equity Opportunities. From its press release: Many funds employing quantitative strategies are currently under pressure as recent conditions have resulted in significant market dislocation. Across most sectors, there has […]
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