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...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...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...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...In Saturday’s New York Times, Gretchen Morgenson reported that House Committee on Oversight and Reform had issued a subpoena to Towers Perrin, an executive compensation consulting firm, because it had failed to comply with an information request regarding potential conflicts of interest in its pay consulting business. Now because this was a news story, rather […]
Read more...Dani Rodrik posted the findings of a paper by Anna Maria Mayda, Kevin O’Rourke, and Richard Sinnot that concludes that that public has less protectionist leanings in countries with a larger government sector (which presumably means more social services). Rodrik was surprised by their conclusion. I am surprised that Rodrik is surprised. Martin Wolf, the […]
Read more...We had wanted to write about the role of models and more important, model assumptions in the ongoing Bear Stearns hedge fund debacle, and Gretchen Morgenson of the New York Times, in her story, “When Models Misbehave,” provided some useful intelligence. With all due respect to Morgenson, while she touches on some dimensions of the […]
Read more...While it’s no news to anyone in M&A land that CEOs have considerable incentives to do deals, it’s nice to see that the wider world is taking notice. The dirty secret is that, at least the way the comp consultants cut the numbers, CEOs of bigger companies get paid more. So when a CEO winds […]
Read more...An article, “Better Deeds,” by Doug Smith at Slate tells us that, contrary to popular opinion, one group of subprime mortgage lenders has done well with the product and is experiencing default rates comparable to that of prime mortgages. And no, they aren’t seeing rising arrearages either (generally speaking, mortgage defaults and foreclosures track the […]
Read more...Since Microsoft Chairman Bill Gates has increasingly shifted his focus from his technology enterprise to his charity, the William and Melinda Gates Foundation, he has also had time to clarify and refine his objectives. Unlike the super-wealthy of the past, whose giving typically has been motivated by a combination of enhancing their prestige (often revealed […]
Read more...This story by Tim Bond in Thursday’s Financial Times, provides an excellent explanation of how a change in the universe of bond investors has produced new outcomes, like a difficult-to-explain negative yield curve. It also looks prescient in light of the plummet in long-dated Treasuries that day. Bond’s article says that “long term bonds are […]
Read more...Ever since we learned that the perilous state of the oceans is a top 25 underreported story, we decided to our bit to rectify that by giving articles on the state of the seas more prominence. At current fishing rates, fish stocks will collapse by 2050. But why hasn’t the invisible hand interceded? If fish […]
Read more...Michael Panzner of Financial Armageddon provides a nice synopsis of the oft-unappreciated adverse consequences of securitization. One element that is not inherent but seems inevitable is that the profits in the transaction are front-loaded, taken more as fees and less as spreads over the cost of funding over the life of the transaction. As he […]
Read more...That’s what Lewis Ranieri, who can lay claim to founding the mortgage-backed securities market, said in presentation at a Milken Institute conference last week. He asserted that 50% of the subprime borrowers qualified for loans from the FHA, Freddie Mac, or Fannie Mae on much more favorable terms. Tanta at Calculated Risk looks to see […]
Read more...