Archive for October, 2008
Wednesday, October 29th, 2008
So the Phillies just won the World Series 20 minutes ago. In his acceptance speech, the owner did the stand-up thing by first acknowledging the Rays and their great effort. For all you baseball fans out there: has it sunk in that the Rays made it to the World Series ...
Posted in Uncategorized | 1 Comment »
Tuesday, October 28th, 2008
Banks AREN'T lending the money being gifted by Treasury! They're using it to stabilize their balance sheets. As the WSJ is reporting this morning, most banks are hanging onto the cash being injected by Paulson, as opposed to using it for fresh loans, much to the chagrin of Democrats Chuck ...
Posted in bailout, banking, credit crunch, Wall Street | 4 Comments »
Monday, October 27th, 2008
This might be old news to readers of this blog, but still a nice way of putting it.
In this article, the Times does a good job summarizing the observations of three deans of high finance, Stephen Friedman, Marty Lipton and Joseph Rice III. These guys know what they are talking ...
Posted in Economy, Wall Street | 4 Comments »
Friday, October 24th, 2008
Stock market futures have triggered circuit breakers this morning, down the maximum they are allowed before the open. The SPX suggests the S&P will open down 9%. Everything is getting hammered in pre-market trading. Japan's Nikkei was off 10% overnight to 7649. It had been over 18,000 ...
Posted in bubble, credit crunch, Dollar, Economy, Interest Rates, taxpayer issues | 6 Comments »
Wednesday, October 22nd, 2008
Rolfe is right: capitalism requires failure. But it requires failure on the small scale, not systematic failure.
When Joseph Schumpeter published The Theory of Economic Development and identified the business cycle and the losses and gains associated with creative destruction he was analyzing firms and industries, not economies as a whole. ...
Posted in bailout, banking, Economy | 14 Comments »
Wednesday, October 22nd, 2008
A question for readers: capitalism without failure is like.....what? Fill in the blank.
In the wake of recent financial tumult, the world's governments have extended an implicit guarantee to the worldwide financial system. There will be no more Lehmans. No more large bankruptcies.
So companies like Wells Fargo and General Motors buy---or ...
Posted in bailout, banking, credit crunch, stocks, Wall Street | 13 Comments »
Monday, October 20th, 2008
Yeah, yeah, Gordon Gekko doesn't have much to teach us now. Insider trading is passe.
With that in mind, check out what politically ambitious prosecutors cut their teeth on today.
If Gekko was trading now he would be playing the spread between credit default swaps (CDS) and the equities of the reference ...
Posted in banking, credit default swaps, shorts | 4 Comments »
Friday, October 17th, 2008
I'd never heard of Andrew Lahde until I saw CR's post on him tonight. He scored AMAZING returns betting against subprime. Below is his farewell letter to investors.
According to Forbes, he closed up shop last month because, he said, "his bank counterparties had gotten too risky to trade with." Interesting.
I ...
Posted in Uncategorized | 17 Comments »
Friday, October 17th, 2008
Tune in to Ron Smith's show at WBAL.com by clicking on the "listen live" link at the top left of the main part of the page.
The segment should begin after weather, news, traffic at about 4:35.
Posted in Uncategorized | No Comments »
Thursday, October 16th, 2008
Where did the Lehman payouts go?
Over the weekend, the Depository Trust & Clearing Corporation (DTCC) issued a release stating that the net credit default swap (CDS) payout on Lehman bonds, to be paid on October 21. I’ve been talking to a few people about this over the last few days ...
Posted in banking, credit default swaps | 6 Comments »
Thursday, October 16th, 2008
It's well-known that bond investors flew to quality last month, buying up short-dated Treasuries at fantastic rates (chart courtesy of Curious Cat). In a world where anyone could go bankrupt as the financial system melts down, who cares about yield? Investors are more concerned with principal protection. They trust Uncle ...
Posted in banking, inflation, Interest Rates, Wall Street | 1 Comment »
Wednesday, October 15th, 2008
Brad Setser recently commented: "All major financial institutions in the G-10 ultimately now have access — through their national central bank — to the Fed." To avoid another bankruptcy the size of Lehman, the Fed has basically guaranteed, well, the worldwide banking system. The problem is that an "unlimited guarantee ...
Posted in bailout, banking, bubble, credit crunch, Economy, Fed, government spending, GSE, inflation, Interest Rates, politics, taxpayer issues | 20 Comments »
Tuesday, October 14th, 2008
My old employer, The Providence Journal, has been kind enough to publish another one of my Op-Eds. This one lays out why I think the bailout bill, or TARP, is needed. It’s a little behind the curve, but that is because news travels faster than the ProJo’s publication schedule.
I ...
Posted in Uncategorized | 5 Comments »
Monday, October 13th, 2008
Morgan Stanley needs cash and fast. Let's hope Mitsubishi UFJ, or someone (Secretary Paulson?), is feeling generous.
Last week, I wrote that regulators should not allow another big financial firm to declare bankruptcy because of the consequences such an event would have in the credit default swap (CDS) market. I was wrong. ...
Posted in banking, credit default swaps | 3 Comments »
Sunday, October 12th, 2008
Have the markets finally caught a break?
Fears that Lehman's Credit Default Swaps (CDS) settlement would lead to more bankruptcies might be unfounded.
The net fund transfers from CDS protection sellers to CDS protection buyers is expected to be in the $6 billion range, according to a release issued yesterday by the ...
Posted in credit default swaps, Wall Street | 10 Comments »
Saturday, October 11th, 2008
According to the AP, Speaker Pelosi is already making plans for an Obama presidency, specifically writing more bailout stimulus checks:
After consulting with Barack Obama, Democratic leaders are likely to call Congress back to work after the election in hopes of passing legislation that would include extended jobless benefits, money for ...
Posted in bailout, bubble, credit default swaps, Economy, government spending, taxpayer issues | 3 Comments »
Saturday, October 11th, 2008
A reader asks "what is LIBOR?" This is important people. Here's the nutshell:
Libor (pronouned "lie-bore") = London Interbank Offered Rate. (There are four of them for different maturities, but for simplicity let's just think of LIBOR as one interest rate) It's the interest rate banks charge each other for short-term ...
Posted in banking, credit crunch, Economy, Fed, Interest Rates | 4 Comments »
Friday, October 10th, 2008
Credit defaults swaps referencing Lehman Bros. debt settled today for around 90 cents on the dollar. See here. But we are not likely to find out the consequences for two weeks. See here.
CDS are insurance policies on bonds to protect buyers if those bonds default. Lehman's bonds defaulted so ...
Posted in credit default swaps, Economy | No Comments »
Friday, October 10th, 2008
I'm pleased to be joined by Arthur Kimball. Previously a reporter for Dow Jones NewsWires and the Providence Journal, Art is particularly well-versed in the ways of CDS.
I'm thrilled he's on board as there's lots going on in the CDS world that needs commenting on. Especially in a way that ...
Posted in Uncategorized | 1 Comment »
Thursday, October 9th, 2008
The Dow lost about 600 in the last couple hours of trading today. It ended down 678 for the day. Off 7.3%(!)
The Dow is off 40% from its high, reached October 11th, 2007. The S&P is off 43% from its high. The Russell 2000 index of small stocks, which had ...
Posted in bubble, credit crunch, Economy, stocks, Wall Street | 7 Comments »
Wednesday, October 8th, 2008
....the Federal Reserve will lend directly to corporations. Announced today, the Fed's latest plan to help unclog the credit markets is to provide financing directly to borrowers in the commercial paper market. According to the Journal:
The central bank, with the backing of the U.S. Treasury, said it would make loans ...
Posted in bailout, credit crunch, Economy, Fed, government spending, Interest Rates, taxpayer issues | 3 Comments »
Monday, October 6th, 2008
Maybe the Pope would get behind the gold standard:
Pope Benedict XVI today said that the global credit crisis shows that the world's financial systems are "built on sand" and that only the works of God have "solid reality".
Opening a Synod of Bishops in the Vatican the Pope referred to a ...
Posted in Dollar, Economy | 3 Comments »
Monday, October 6th, 2008
An interesting video (hat tip Patrick).
As I wrote previously, some very scary scenarios are being kicked around Capitol Hill. Paulson and Bernanke know what's at stake if the financial crisis devolves into nationwide bank runs. They shared those feelings during a meeting two Thursdays ago:
Senator Chris Dodd: congressional leaders were ...
Posted in banking, credit crunch, Economy, Fed, politics | 4 Comments »
Sunday, October 5th, 2008
Barring any extensions from the SEC, shorts should return to the market on Thursday. From MarketWatch:
The Securities and Exchange Commission said late Friday that its short-selling ban will expire just before midnight on Wednesday.
That means hedge funds and other investors can put new bearish bets on shares of financial-services companies ...
Posted in shorts, stocks, Wall Street | 2 Comments »
Friday, October 3rd, 2008
Now California needs a bailout:
California Gov. Arnold Schwarzenegger, alarmed by the ongoing national financial crisis, warned Treasury Secretary Henry M. Paulson on Thursday that the state might need an emergency loan of as much as $7 billion from the federal government within weeks.
The warning comes as California is close to ...
Posted in bailout, bubble, credit crunch, government spending, taxpayer issues | 4 Comments »
