Before we get to the fun stuff, in which I foam at the mouth, let me stress one thing: I am not opposed to hedge funds. I have both friends and clients who run hedge funds. And philosophically, a certain amount of speculative capital helps the economy run more smoothly. What I am opposed to […]
Read more...In an odd happenstance of timing, the IMF published a report on Wednesday that declared the dollar to be overvalued. As we have noted before, this isn’t the first time they’ve come to this conclusion (they issued a similar finding at the beginning of August). That view, by the way, isn’t one that has made […]
Read more...An excellent post by Angel Ubide, an economist for Tudor Investments as well as for the Center for European Policy Studies, at Vox EU (you need to click through to Telos to read the full text). He starts with a simple premise, that this crisis can’t be about liquidity because aggressive injections of liquidity haven’t […]
Read more...In the absence of an announcement by Citigroup, JP Morgan, and Bank of America on the structure of their proposed SIV bailout vehicle, the MLEC, today’s news consisted mainly of reactions by interested parties, many of which were revealing. However, there were a few substantive developments (then to the commentary). First was the leaking of […]
Read more...As we have discussed, the traditional and still most attractive way to deal with troubled borrowers, including mortgage borrowers, is to ascertain whether it is more attractive to modify the terms of the loan or foreclose. Quite often if the borrower has reasonably steady income, a workout is a better solution. However, in our Brave […]
Read more...I’ve been having so much with SIVs that I am late to this piece from Bloomberg. It describes how Paulson will face a great deal of criticism from his G-7 peers this week due to his stance on regulation (more accurately, the desirability of a lack thereof) and the dollar. The writer believes Paulson is […]
Read more...Although the details of the planned SIV rescue program, the so called Master Liquidity Enhancement Conduit (MLEC) have yet to be announced, enough has been leaked to allow us to speculate with slightly greater confidence. Since this whole enterprise has a hall of mirrors quality to it, in the spirit of Lewis Carroll, we’ll start […]
Read more...In a fine comment in today’s Financial Times, Wolfgang Munchau argues that central bankers need to straighten out our current credit mess, since they created it in the first place. He argues that many of the alleged causes are actually secondary, and the underlying source was negative real interest rates, which is guaranteed to produce […]
Read more...Bad enough that we have to worry that any further Fed fund rate reductions will lead to increases in long bond rates. That happened with the September 18 50 basis point cut, since investors regarded the move as inflationary. But further Fed cuts or no, it looks like we will see more upward pressure on […]
Read more...While it’s risky to opine about a plan described only in sketchy rumors, what we have seen so far about the possible bailout plan for structured investment vehicles, the entities responsible for the unresolved problems in the money markets, doesn’t give us a great deal of confidence that this program will come into being (see […]
Read more...The recent record highs in stock market were presupposed on the notion that the credit crisis of the summer was now history and that growth would resume its former course. Investors chose to regard large writeoffs at UBS, Citigroup, Merrill, and Deutsche Bank as signs that they were all putting the problems behind them. That […]
Read more...In an interesting bit of synchronicity, the role of value-at-risk models has come into focus in the last couple of days. By way of background, VAR is a widely used risk management technique. It defines the level of risk by assessing the most one might lose in a set time period (typically one day) with […]
Read more...Forgive me for critiquing two Wall Street Journal articles in one evening, but the worst offender (this one) caught my eye second. It’s frustrating because this page one story, “U.S. Investors Face An Age of Murky Pricing,” attempts to explain the role of transparency, or more accurately, the lack thereof, in the recent credit market […]
Read more...Yale Professor Jeffrey Garten has long argued that letting the dollar fall will do little to remedy America’s chronic balance of payments deficit. In a recent Newsweek article that picks up on themes he presented in a 2004 New York Times op-ed, namely, that America is so addicted to imports that a big fall in […]
Read more...Northern Rock has, for the most part, slipped from the attention of most Americans, and that’s a mistake, because the bank’s failure and resoluton is a useful object lesson. Admittedly, England has a different bank regulatory regime than the US. The biggest difference, until recently, was that retail deposits were only partially guaranteed and it […]
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