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 […]
Read more...The Financial Times indicated today that European banks were willing to provide commercial paper only on an overnight basis to a relatively lengthy list of names they regarded as under stress. That is a dramatic departure from normal market operations. Accordingly, the European Central Bank has found it necessary to infuse funds for a third […]
Read more...If the Financial Times’ Gillian Tett were hit by a bus, I’d be in a lot of trouble. With all due respect to her colleagues, she is the best source of financial news. Today, in “Structured investment vehicles’ role in crisis,” Tett probes what went wrong in the credit markets last week. As others have […]
Read more...One sign that market conditions are, at least temporarily, on the mend: both the Financial Times and the Wall Street Journal have stories on moral hazard. If you have time for sermons, things can’t be all that bad. And in confirmation, Asian markets are up solidly as of this hour. Of the two stories on […]
Read more...The New York Times, among others, endeavored to shed more light on why quantitatively oriented funds like Global Alpha (down 26% YTD), Cliff Asness’s AQR (down 13% in August) and James Simon’s Renaissance Technologies (down 7% YTD) are doing so badly. Short answer: these funds rely on models that look at statistical norms, and these […]
Read more...As readers doubtless know, a nasty day in the markets yesterday was followed by distress overnight as the Japanese central bank injected funds into the marketplace and the European Central Bank added liquidity a second day, following an unprecedented, unlimited injection Thursday. The Dow opened down over 100 points, and due to a spike up […]
Read more...The ECB made an unprecedented offer of unlimited funds to member banks as the demand for cash soared as a result of Paribas freezing redemptions of three funds. Mind you, these funds only had $2.2 billion of assets, far less than the troubled Bear hedge funds. The reaction seems disproportionate, unless you factor in that […]
Read more...The news item of the morning (aside from the markets suffering a loss of confidence) is that BNP Paribas has blocked withdrawals from three funds that had an aggregate of $2.2 billion in assets, which had fallen by 20% in a mere two weeks. Note that this action is not the direct result of subprime […]
Read more...The Financial Times has a thorough story today, “US seeks culprits for subprime,” on who is to blame for the subprime mess. Short answer: just about everybody involved. It isn’t until the fourth paragraph that the authors invoke the word “fraud” but that’s what it’s all about The piece recounts the sorry tale of the […]
Read more...An article in Wednesday’s Financial Times, Unbound, by Gillian Tett, discusses how trading in credit derivatives generally and in the iTraxx contract in particular has become more important than the bond markets. Because my brain is a bit fried due to jet lag, I will be brief and hopefully won’t oversimplify, although I will probably […]
Read more...Two major types of hedge fund strategies, namely event-driven (Newspeak for risk arbitrage) and statistical arbitrage (typically, very high volume trading to capture and correct anomalies in prices relationships in various markets, such as among stocks bonds, or derivatives, or across markets) are having trouble. It isn’t yet clear how far reaching these problems are. […]
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