This forecast, that Wall Street credit-crunch-related losses could eventually total $460 billion, is mind-numbing. Consider that less than two weeks ago, the markets staged a rally on the comparatively cheery S&P forecast that a subprime bottom was in sight, that the total damage would be a mere $285 billion, and most of the rest of […]
Read more...A hedge fund correspondent pointed us to an article at Institutional Risk Analytics on the Bear-JP Morgan deal. While we don’t subscribe to its view that Bear was “raped” (please, the firm was going to file for bankruptcy a week ago Monday), it contains an intriguing analysis of JP Morgan. Differing with popular opinion, IRA […]
Read more...Andrew Ross Sorkin in the New York Times provides some important background on how the Bear deal wound up being retraded today. But he does his readers and the greater public a huge disservice by telling the story so as to flatter Wall Street. According to Sorkin, the $2 price for Bear was the Fed’s […]
Read more...What a complete and utter fiasco (see earlier post for background). And you have to get a load of the face-saving. No official acknowledgment of the legal screw-up that made this retrade necessary. Note there is no mention of any change in the Fed’s, role, something that was rumored earlier. This will not go down […]
Read more...This is the nuttiest situation I can recall in some time in deal land, assuming the rumor in the New York Times is true. The Grey Lady reports that JPM is working to increase its offer for Bear from $2 (well, roughly $2 since it is a stock-for-stock deal) to $10. Yes, Bear’s stock price […]
Read more...There are two useful but frustrating articles addressing different aspects of the extraordinary measures implemented by the Federal Reserve in the last ten days, in particular the bailout of Bear Stearns. A New York Times article, “What Created This Monster,” is very much worth reading despite its shortcomings. It attempts to say how we got […]
Read more...A nice recap in the Guardian of how far underwater the various sovereign wealth funds are on their investments in large Western financial institutions. The tally is not pretty. It isn’t simply that the losses are large in percentage terms, but the falls came fast, making the buyers look like chumps. And these were high […]
Read more...I quoted Lucy Kellaway, who once said (apropos management fads), “No idea is too ridiculous to be put into practice,” and warned that the credit crisis would soon get that sort of treatment. A story in the Financial Times indicated we are getting closer to that stage: Central banks on both sides of the Atlantic […]
Read more...I am mystified at the efforts by soon-to-be-ex chairman of Bear Stearns and still-barely-a-billionaire Joe Lewis, who took a large stake in the securities firm, to try to find another buyer for Bear. My pet theory is that Lewis et all are bluffing, knowing they have a very bad hand, to scare bondholders and CDS […]
Read more...A sign of the times: we haven’t sighted an Extreme Measure since October, and here we have two in one day (note that day was Thursday; we started on this last night but there were so many news-driven items that we are getting to this only now). By way of background, an Extreme Measure is […]
Read more...The market had taken some comfort from Lehman’s and Goldman’s first quarter better-than-expected results; these will likely be undone by the surprise warning by Credit Suisse, which heretofore had looked comparatively unscathed, by virtue of remaining profitable. That was undone today when the Swiss bank announced it expected to lose money this quarter. What is […]
Read more...Investors are so nervous that they are willing to take almost nothing in nominal terms, which is tantamount to a meaningful negative real return, to sit in the safety of three-month T-bills, which are now a mere 0.56%. One explanation is the large number of fails in the repo market, which as Alea reports, is […]
Read more...A professional investor alerted me to a not-widely-noted element of the Fed’s new discount window clone for primary dealers, the so-called Primary Dealers’ Credit Facility (I am going to lose track of the acronyms given the speed with which the Fed is coming up with new ways to socialize losses). This overview is from the […]
Read more...A colleague I’ve cited occasionally who has extensive contacts at the Treasury and pretty good ones at the Fed has been muttering for some time that European banks are in every bit as bad shape as US banks and he has been waiting for that shoe to drop. He also sees that as intermediate good […]
Read more...A bit of good news on the generally gloomy credit markets front: banks have managed to unload some of the LBO loans they have held on their balance sheets. Admittedly, however, they still have great deal more to place, nearly $130 billion of buyout debt. However, they have had to offer large discounts. Recent reports […]
Read more...