Ah, time for a reality check on the Wall Street Journal/Administration party line. Here we’ve been told how horrible Sarbanes-Oxley is, and how those tough corporate governance measures are bad for the competitiveness of US markets. Like many of the things the officialdom in Washington has been telling the public, this line of reasoning doesn’t […]
Read more...Bloomberg Magazine, in “Unsafe Havens,” reports that money market funds run by Bank of America Corp., Credit Suisse Group, Fidelity Investments and Morgan Stanley owned over $6 billion of CDOs with subprime debt in June. The reason this is a serious issue is that money market funds have a $1 NAV, meaning “net asset value” […]
Read more...Goldman, on the back foot about the truly abysmal performance of its Global Alpha fund, is trying to shore up investor confidence, or more accurately, forestall a revolt. However, a Wall Street Journal article reports that they aren’t taking the sort of measures they did in August with the troubled Global Equity Opportunities Fund, when […]
Read more...Bloomberg reports that Goldman’s big hedge fund, Global Alpha, which took a beating along with other quantitatively oriented traders, was down 22.5% in August. Even among quant funds, this was lackluster performance. James Simons’ Renaissance Technologies recouped the 8.7% loss it suffered at the beginning of the month. But here comes the juicy bit: of […]
Read more...The Financial Times’ John Gapper had an interesting piece today, “Patience on debt can ease distress.” I’ll give you the section that caught my eye to see if you react to it the same way I did: Last week, I went to a dinner in Manhattan that ostensibly had nothing to do with the credit […]
Read more...The news from rating agency land goes from bad to worse. This Bloomberg article does much to explain why investors are avoiding subprime like the plague. AAA paper revealed to be CCC. Repeated incidents of financial institutions saying they have no/little subprime exposure, then shortly thereafter fessing up that they have a lot. And rating […]
Read more...This credit contraction is still young, yet we already have the spectacle of a full blown seize up in the money markets which has central bankers flummoxed. Normally, you expect this sort of panic after a few major financial train wrecks and weakness in the real economy. One can cheerily assume that all is for […]
Read more...The Fed’s move on Friday to lower discount rates and its policy shift towards addressing risks to growth has not brought relief to the sector that was in the most distress, the money markets. Panicked action continued Monday, begging the question of what, if anything, the authorities can do. Institutional are fleeing from counterparty risk […]
Read more...A gut-wrenching two weeks in the credit markets have been capped by unprecedented moves by central bankers. The ECB’s offer of an unlimited infusion to member banks the week before last was followed last Friday’ by the Fed’s discount rate cut, which included stern warnings that those who needed it better use it and a […]
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...The Financial Times’ Paul Davies has written a good short piece on the basics of CDOs, which is useful if you are ever in the unfortunate position of having to explain them to someone new to the concept. He also suggests that subprime-related CDOs going pear shaped is not an indictment of the technology. Nevertheless, […]
Read more...Floyd Norris has an article in today’s New York Times, “Market Shock: AAA Rating May Be Junk,” that is enough off the mark to be annoying. The problem with the article isn’t so much inaccuracy as superficiality. Norris points out correctly that a lot of buyers are waking up to the unpleasant reality that that […]
Read more...Investment News Daily said that a major hedge fund index had to revise its performance results downward due to the losses reported at the failed Bear Stearns hedge funds. Normally, this sort of event wouldn’t be noteworthy. A number of different indices measure hedge fund performance, and they report it by strategy (e.g., global macro, […]
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...I will let you in on a dirty secret. Appearances to the contrary, this blog isn’t about finance and markets. Its real purpose is to encourage critical thinking, but since I know a wee bit about the financial services industry, I tend to use that as the point of departure. In that vein, it’s important […]
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