As Russ Winter describes the recent runup in margin debt in “Leveraged to the Hilt.” Needless to say, heavy use of margin is considered a sign of speculative excess. I believe much of the market move can be attributed to synthetic leverage (futures). But now we get more evidence that a parabolic move in the […]
Read more...Bloomberg, in “GE Plans to Seek Buyer for Subprime Mortgage Unit,” tells us that for GE, cutting its subprime lending business WMC’s staff by more than 50% wasn’t enough. The parent told staff via e-mail that the business is to be sold. It reportedly contributed $100 million of GE’s total $20 billion profits in 2006, […]
Read more...This post is mainly for those who like data. The Financial Times, citing the Bank of International Settlements, reports that worldwide sales of collateralized debt obligations were $251 billion in the first quarter of 2007, and synthetic CDO sales were $121 billion, both record levels. To give a sense of magnitude, total US rated subprime […]
Read more...That’s the question from Felix Salmon, and like Diogenes looking for an honest man, so far he hasn’t found anyone who has an answer. Salmon is getting close to the dirty secret: no one has an answer. The most they have are some interesting datapoints, factoids, and analyses. At the risk of having someone prove […]
Read more...One of the themes du jour is the overrated reporting that goes on in the Wall Street Journal (and we’ve waxed eloquent on this subject many times before, as the posts tagged ‘Media Watch” will attest). While the Journal’s coverage of company news is generally good to very good, it appears that they put their […]
Read more...The Wall Street Journal, in “Fitch Sees Rising Shakiness In Commercial Mortgage Arena,” tells us that the rating agency issued a warning Wednesday on frothy lending in the commercial real estate arena. The problem with this story is that the WSJ makes it sound as if that’s news. It isn’t. The Financial Times reported on […]
Read more...A Fed and Treasury official both said they don’t see the downgrade of some subprime related debt leading to a broader meltdown, but instead see the repricing of credit working itself through in an orderly fashion. The fact that they felt the need to issue the reassurance in and of itself isn’t a good sign, […]
Read more...Hhhm, “orderly” seems to be the favorite word from the finance officialdom today, and we see yet another reference to systemic risk (in this case, that the SEC remains vigilant on that front). But as regards the Bear situation, the comment from the SEC isn’t much in the way of news (however, “now orderly” would […]
Read more...Readers of this blog know that I have been concerned about the state of the credit markets for some time. We’ve had (until the last month or so), rampant liquidity feeding asset bubbles in virtually every asset class except the dollar and the yen, tight risk spreads (that means inadequate compensation for risk assumption), lax […]
Read more...Bloomberg reports that Moody’s has dropped its ratings on 399 subprime related bonds and is reviewing ratings on another 32. Standard & Poors had announced earlier in the day that it is preparing to cut ratings on 2.1% of the bonds that have subprime exposure, or roughly $12 billion out of a universe of $565 […]
Read more...Apologies for the reliance on the Financial Times today, but it happened to have a lot of good material. The CEO of Harvard Management, Mohamed El-Erian, writes the occasional opinion piece, usually for the Financial Times, and I’ve always featured them because they are consistently thoughtful and well-argued. I’m highlighting his latest FT piece, “How […]
Read more...John Dizard, who writes a pretty-much-weekly column for the Financial Times, typically presenting an exotic investment idea, has long given me the impression he spends much of his day gossiping with people on trading desks. Which means he is very much plugged in, and some of the remarks he makes in passing can be more […]
Read more...Ciitgroup CEO Charles Prince, in an exclusive interview with the Financial Times, said something I expect he will come to regret: Chuck Prince on Monday dismissed fears that the music was about to stop for the cheap credit-fuelled buy-out boom, saying Citigroup was “still dancing”. The Citigroup chief executive told the Financial Times that the […]
Read more...I’ll be brief in introducing this story on leveraged loans in today’s Financial Times, but you might also want to view its companion piece, a story on Citigroup CEO Chuck Prince’s remarks on this market. Leveraged loan prices are at their lowest point since the start of the Gulf War. Some see it as a […]
Read more...Another day, another gloomy housing forecast? The Freddie Mac prediction, that housing sales in the US will total 6.28 million, would be the lowest level since 2001. Not surprisingly, the agency attributed the expected decline to higher interest rates and more stringent lending standards. The report also said Freddie Mac’s home price index, for houses […]
Read more...