Yesterday, we commented critically on a remark by JP Morgan CEO Jamie Dimon in an interview on LBO lending published by Bloomberg, and a reader was kind enough to point us to another Dimon interview, this time in Der Spiegel. “Keeping the Hedge Funds in Check.” It’s a refreshing read, if for no other reason […]
Read more...News reports on a Fitch study on credit default swaps came out yesterday, and I saw it reported in the Financial Times and decided to pass, but other elements of the report have been picked up elsewhere, and I changed my mind. Basically (surprise!) leverage cuts both ways. The FT cited the results of a […]
Read more...Jamie Dimon, CEO of JP Morgan, fesses up that commercial banks like his have overdone it on LBO debt and are likely to take writedowns. At this point, this statement is no revelation. The main point of Dimon’s remarks is to reassure investors that the prospective losses are not significant relative to JP Morgan’s capital […]
Read more...I’m sure you know the old saw about the drunk looking for his keys. A cop comes across a drunk crawling on all fours under a street lamp. The cop asks what he is doing. The drunk says he is looking for his keys. The cop looks about and can’t find any keys, and asks […]
Read more...Tanta at Calculated Risk reported on Fitch’s downgradesof two mortgage trusts. The amount at issue isn’t large. For each of the two First Horizon Home Loan Mortgage Trust issues (series 2006 AA-3 and Series 2006-F-2), Fitch downgraded the lowest two tranches (the BB tranche became B+, the B tranche was downgraded to CCC and and […]
Read more...Today was the day that Bear Stearns was to issue its delayed report on the net asset value of its two failed hedge funds. As we had indicated, investors who had tried selling their interests for 11% of their April value did getting any takers. There had been bids of 5% on the more leveraged […]
Read more...The Wall Street Journal has mentioned in passing that investment bankers have been stuck with hung LBO financings, the result of investor resistance to the terms on offer. This Bloomberg story highlights the degree to which the Wall Street players have been left holding the bag. Unless there is an unexpected change in sentiment, the […]
Read more...There was cheery talk of the rally in Treasuries Monday, but that was in large part due to a continued flight from risk. One symptom was that the riskiest ABX index, ABX.HE 7-01, which is a proxy for recent vintage BBB- subprimes, took a nosedive and then recovered, Traders used swords like “panic” rather than […]
Read more...Why do Americans save so little? It’s the temptation, stupid. John Kay of the Financial Times ponders why Americans and Brits are so lousy at saving when our advanced capital market offer us more attractive investment (and speculative) vehicles than other economies. Because they also offer more, and more varied borrowing products, and let’s face […]
Read more...More gallows humor from the Housing Bubble Blog. You know you are subprime when….(note at least nine of the items on this list happened): The Borrower doesnt know there loan amount, interest rate or mortgage payments. You spend your closing cost money on a motorcycle 2 days before closing. You are adding your boarder’s kid’s […]
Read more...I am at a loss as to which allusion better characterizes rating agency behavior: ostriches, as per the headline, or monkeys, as in “See no evil, hear no evil, speak no evil.” But in each case, I think I am being unfair to the animals. I happened to miss skip past an article in Friday’s […]
Read more...This bombshell came courtesy Michael Shedlock, in “Fitch Discloses Fatally Flawed Rating Model“: What follows are excerpts from Absence of Fear, an excellent article written by Robert L. Rodriguez at First Pacific Advisors.We were on the March 22 call with Fitch regarding the sub-prime securitization market’s difficulties. In their talk, they were highly confident regarding […]
Read more...John Authers of the Financial Times thinks the markets got a lucky break this week, and deferred a so-called Minsky moment, which he discussed in a noteworthy piece earlier. By way of background, economist Hyman Minsky observed that creditors become more lax about lending standards during times of stability. He divided borrowers into three types: […]
Read more...Whether you choose to see it as subprime contagion, repricing of risk, or a temporary correction, prices of debt in various markets are falling, which translates into higher yield requirements. At RGE Monitor, Nouriel Roubini took note (as we did) of a Fitch report warning of overheated lending practices in the commercial real estate lending […]
Read more...From the Wall Street Journal: Standard & Poor’s lowered ratings on 498 bonds backed by subprime home loans, comprising the vast majority of the 612 bonds that it earlier this week said it was reviewing for downgrades. The ratings company also said the 612 bonds were originally worth $7.35 billion, not the $12 billion it […]
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