Currently docked in Marseille (managed to get a Financial Times yesterday in Monaco, so I feel slightly less cut off from the symbol world) and catching up on the grim market news of yesterday. It seems that the equity markets are getting the message that things are bad enough in the credit markets so as […]
Read more...The era of lax lending is inflicting damage on one of its biggest perps, namely, investment banks. Wall Street firms, overeager to win funding mandates from private equity firms, agreed to terms that were very much in favor of the private equity firms. And now the LBO firms are holding them to their financing commitments, […]
Read more...Jim Rogers, who is by no means a card carrying bear, thinks the US housing market, and therefore homebuilder and investment bank stocks, still have further to fall. And the news of the last few days provides confirming data points. First, this morning’s Wall Street Journal has as a page one story a news item […]
Read more...If credit default swaps prices are a valid indicator, the fixed income markets are regrouping. Prices, which spiked up earlier this week on panic buying of risk protection, have eased off. However, while this decline is a good sign, note that it does not equate (yet) to an improvement of liquidity in the riskier sectors […]
Read more...Many observers had expected quite a few hedge funds that had subprime exposures to report significant losses for June, and there have been rumors of funds that had begun the liquidation process because it was apparent they were too badly damaged to survive. But the specter of investors clamoring to pull funds out of a […]
Read more...John Kay, in an interesting but somewhat discursive opinion piece in the Financial Times, compares the structuring of complex securities to alchemy, with all its negative connotations. He points out that the elaborateness of the models has the effect of obscuring risks that would be more apparent otherwise, namely, that if you believe markets are […]
Read more...Credit default swaps prices have risen sharply all over the globe. Nevertheless, the CDS related to the debt of major Wall Street players have been particularly hard hit, which isn’t surprising, given their LBO financing commitments, exposure to hedge funds via their prime brokerage operations, and falling profitability. Some experts, however, think the CDS are […]
Read more...European and Asian equity markets performed well overnight, and according to the futures market, US stocks are set to have a good day as well. Yet the credit markets are in a state of near-panic. Some illustrative factoids and comments from the Financial Times: “It is nothing short of ugly in credit land,” said Alan […]
Read more...Ah, this is one of those days where there way too many good points for departure for commentary and here I am with a pricey and pokey Internet connection, and competing holiday activities. Finally, the reassessment of Greenspan’s tenure has begun. Not surprisingly, the Brits are more pointed in their critique. From “Greenspan has left […]
Read more...Those of you who are long in tooth might remember the days when Dr. Doom, aka Henry Kaufman, chief economist of Salomon Brothers, could move the market. Kaufman was intellectual, articulate, and insightful. I remember as a summer associate listening to his section of the Monday morning meeting at Salomon. You could hear a pin […]
Read more...A draft of a paper, “Innovations in Credit Risk Transfer: Implications for Financial Stability,” by Stanford’s Darrell Duffie, investigates ” the design, prevalence, and effectiveness of credit risk transfer,” with an eye to implications for the financial system. The paper is worth reading for those seriously interested in the CDO/CLO markets, and sets forth a […]
Read more...According to Bloomberg, in “Bulls Load Up on Stocks in Worst Rout Since 2002 ,” optimistic investors are undeterred. In general, bond markets downturns precede stock market declines, since equity market investors need to be convinced that the signals from the credit markets are valid. In my youth, the lag was usually four months. And […]
Read more...At junctures like this, when markets have come a bit unglued and may be undergoing a sea change, making forecasts is as scientific a process as reading tea leaves. And since I am (literally) at sea with pricey satellite access, I’m limiting myself to checking the usual suspect media sources rather than being as comprehensive […]
Read more...Today’s Financial Times has a good piece on the turmoil in the markets yesterday, which has continued into Asian markets today (although Europe appears to be staging a recovery). There were two noteworthy elements in this article, namely the divergence between the equity and credit market perspectives, the second on Bernanke’s posture. On the first […]
Read more...We warned earlier that if conditions deteriorated in the financial markets, investment banks were particularly exposed by virtue of their taking on multiple exposures to the same underlying risk. For example, they lend to hedge funds via their prime brokerage operations, and also may be exposed to them by providing credit default swaps on assets […]
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