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...Pity the poor sell side analyst. These guys have to be bright, numerate, articulate, and presentable. Yet they have to maintain the pretense that they are objective while acting as shills for stocks, and to add insult to injury, whenever they muster up the nerve to issue a harsh report (usually when the company is […]
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...I really didn’t expect “rogue agent” to become a mini-theme, but a mere two days apart, we have stories in the Wall Street Journal and the New York Times on rogue agents ripping off the unwary and the unsophisticated. However, as we discussed, the Journal story about rogue mortgage brokers made it sound as if […]
Read more...If you are a public company, the odds say that buying another corporation is a bad idea. Academic studies have consistently found that most deals fail, and the reason most commonly cited it that the buyers overpay. Yet as with second marriages, the continued popularity of corporate M&A is a triumph of hope over experience. […]
Read more...As we noted earlier, a minor casualty in Bear-Stearns-hedge-fund-meltdown-induced repricing of CMOs was a mid-sized, independent-contractor broker-dealer Brookstreet Securities, which blew a hole in its balance sheet when its clearing firm repriced the assets in many of its margin accounts and issued margin calls. Tanta at Calculated Risk found out (via the OC Register) why […]
Read more...That’s the question raised by the Financial Times’ capital markets editor Gillian Tett in a short update on rating agencies, and it’s an important one. As we discussed earlier, the credit markets have come to depend on rating agencies: If a terrorist were to blow up Moodys, S&P, and Fitch, it would have a devastating […]
Read more...The Wall Street Journal provides a pre-holiday Bear recap, “After Blowup, Bear to Revamp Risk Control” (reproduced in full below). The high points: 1. Bear is bringing its asset management unit under tighter control of its parent and implementing stronger risk controls. Apparently the stringent practices of its trading floor weren’t observed in the asset […]
Read more...In “GAO: Consultant Conflicts May Slash Pension Returns,” CFO.com reports on a GAO study that looked into the performance of defined benefit pension funds that used consultants that had undisclosed conflicts of interest. The analysis found that the funds that relied on these advisors had lower investment returns. Their annual results were 1.3% lower on […]
Read more...James Hamilton of Econbrowser, in “CDOs: what’s the big deal?” weighs in on the question of what went wrong in the CDO market. He makes a point I haven’t seen stated as clearly anywhere else, namely, some CDO tranches may have been been likely to lose money from the get-go: The benign view of CDOs […]
Read more...As readers may know, I sometimes find marked differences in how the Financial Times and the Wall Street Journal report the same story, with the FT typically doing a much better job. In this case, I was underwhelmed by both papers’ coverage, but together they conveyed some useful information. Federal banking regulators (including credit union […]
Read more...In a move intended to restore confidence, Bear Stearns has sidelined former asset management head Richard Marin (he remains as an advisor) and has brought in Jeffrey Lane, vice chairman of Lehman, as his replacement. Ousting Marin was pretty much required, and on paper Lane has the right stuff (Lehman is a serious bond player, […]
Read more...There’s been plenty of discussion on this blog and elsewhere of the questionable role of rating agencies, particularly regarding collateralized debt obligations. Rating agencies are slow to downgrade weakening credits (if you are in the debt business, this is very old news), suffer from acute conflicts of interest in rating CDOs (they are a de […]
Read more...Another day, another subprime casualty? The Caliber hedge fund was heavily exposed to 2005 subprimes, which is a new cause for pause, since heretofore, it was the 2006 subprimes that had shown the worst performance. But now troubles are showing up in the 2005 cohort. The UK fund isn’t as big as either of the […]
Read more...For those of you who are relatively new to the complexities involved in the pricing of collateralized debt obligations (CDOs), this Financial Times article, “Worries grow about the true value of repackaged debt,” gives a good overview. Since the article is lengthy, and the first part covers largely familiar ground, I’ve excerpted the second half. […]
Read more...