Archive for November, 2008
Sunday, November 30th, 2008
Already, we've written about NY's budget hell. Adding to the pressure, estimated tax payments came in too heavy earlier in the year, necessitating $800 million worth of rebates through October. According to the NYT:
New York City, grappling with the aftershocks of the global financial crisis, has been forced to refund ...
Posted in politics, taxpayer issues | 1 Comment »
Sunday, November 30th, 2008
[Today on OA, a guest column by Dash Riprock. Dash previously worked as a CDO underwriter at a U.S. brokerage house in New York. He currently helps evaluate fixed income derivatives for banks and insurers.]
With all the talk of bank failures and government involvement here on OptionARMageddon and throughout the ...
Posted in banking, credit crunch, Wall Street | 7 Comments »
Tuesday, November 25th, 2008
Here's a hilarious story (via SWF Radar). Libya has a sovereign wealth fund, and Gadhafi's son said he wants to invest here in the U.S.:
Libya wants to open a new chapter in relations with the United States by investing some of its $100 billion sovereign wealth fund in U.S. companies ...
Posted in bailout, politics | 3 Comments »
Tuesday, November 25th, 2008
For all of you asking: "Why all these bailouts?" Below is why.
The Iceland economy is at a standstill after the implosion of its banking system. What caused the implosion? A ridiculously overleveraged banking system, not unlike our own.
The bailouts are our government's attempt to avert the kind of banking ...
Posted in banking, bubble, credit crunch | 10 Comments »
Monday, November 24th, 2008
A good op-ed in today's WSJ argues that the Fed is "out of ammunition" and that the fallout of this crisis, and in particular the government's choice to fight it with unlimited guarantees, may well be the break-down of our monetary system. It concludes with this:
In this respect the present ...
Posted in bailout, banking, bubble, credit crunch, Dollar, Fed, gold, inflation, Interest Rates, taxpayer issues | 2 Comments »
Monday, November 24th, 2008
(Here are part 1 & part 2 in case you missed them)
Why am I excluding preferred capital? A great question from reader Mark. GE and GS are both on my leverage chart, and not only an I excluding the preferred capital they raised from Buffett, I'm excluding the TARP capital ...
Posted in accounting, bailout, banking, credit crunch, government spending, stocks, Wall Street | 5 Comments »
Monday, November 24th, 2008
As I noted in my last post, I was being charitable when I calculated leverage ratios for the big banks. Citigroup, for instance, has $165 billion of "Other Assets" listed on their most recent balance sheet. The company deliberately does NOT provide additional disclosure regarding what's in that bucket, not ...
Posted in accounting, bailout, banking, bubble, credit crunch, Dollar, Fed, gold, stocks, Wall Street | 6 Comments »
Monday, November 24th, 2008
So what is the capital cushion underneath our largest financial institutions? I spent today compiling this spreadsheet:
Those are some ugly numbers and I'll explain why. Citigroup's leverage ratio of 56 means that the bank has $56 of assets for every $1 of common equity. If the value of ...
Posted in accounting, bailout, banking, bankruptcy, credit crunch | 38 Comments »
Friday, November 21st, 2008
The Financial Times' blog FT Alphaville has me going toe-to-toe with Dick Bove. For the uninitiated, Dick is a high-profile banking analyst, regularly interviewed on CNBC.
He said last March to buy financials. Oops. He also said Lehman would survive. Double oops.
Bove's is the first block quote in the article. Mine ...
Posted in banking, credit crunch, stocks, Wall Street | 6 Comments »
Friday, November 21st, 2008
The stock just keeps falling. It's at $3.70 as I write this (see chart down and to the right, hit refresh if it doesn't appear).
And the selling pressure is likely to continue. A close friend that works in JPM's prime brokerage unit forwarded this report from CNBC. The selling pressure ...
Posted in banking, credit crunch, Wall Street | 3 Comments »
Friday, November 21st, 2008
And it's in Treasuries. Hopefully, Brad Setser doesn't mind me borrowing one of his charts:
Remember, bond yields vary inversely with bond prices (see chart below for what flight to quality looks like in terms of bond prices). People are willing to pay virtually any price to own short-term Treasuries. (For ...
Posted in banking, bankruptcy, bubble, credit crunch, Economy, inflation, Interest Rates | 9 Comments »
Thursday, November 20th, 2008
The Citigroup Death Watch continues, according to the Journal:
The sell-off in Citigroup shares has led executives to start laying out possible contingency plans. In addition to pondering a move to sell the entire company to another bank, executives have started exploring the possibility of selling off parts of the firm, ...
Posted in bailout, banking, credit crunch, Fed, stocks, Wall Street | 2 Comments »
Thursday, November 20th, 2008
According to a confidential IAEA report, the site in Syria bombed by Israel last year was likely a nuclear reactor:
...The [IAEA]...said that soil samples taken from the bombed site had a "significant number" of chemically processed natural uranium particles. A senior U.N official, who demanded anonymity because the information was ...
Posted in politics | 5 Comments »
Thursday, November 20th, 2008
---What if there's no such thing as a risk-free asset?---
The foundation of so-called "modern" portfolio theory is the concept of diversification. A well-constructed portfolio should have a mix of asset classes---e.g. stocks, bonds, CDs---and a mix of securities within each asset class---e.g. large cap and small cap stocks. There's no ...
Posted in accounting, banking, credit crunch, Dollar, Economy, Fed, government spending, inflation | 11 Comments »
Wednesday, November 19th, 2008
Quality of life in NYC is likely to deteriorate over the next few years as state/city governments make draconian cuts and/or raise taxes to balance their budgets. According to the Journal:
...New York finds itself in a particularly perilous spot because of its increasingly heavy reliance on the financial sector as ...
Posted in government spending, taxpayer issues, Wall Street | No Comments »
Wednesday, November 19th, 2008
Distressed sellers
Huge inventory of existing stock available for sale
Lack of financing for buyers
All of the above
Check out this article from Bloomberg:
American Airlines, United Airlines and Continental Airlines Inc., stung by fuel costs and a drop in traffic, face a new challenge: what to do with planes valued at $2 billion ...
Posted in credit crunch, Dollar, Economy, Fed, inflation, stocks | 1 Comment »
Tuesday, November 18th, 2008
Citigroup stock fell below $8 during mid-day trading. I'm just sayin'...
View the full C chart at Wikinvest
Posted in banking, credit crunch, Wall Street | 1 Comment »
Tuesday, November 18th, 2008
The title above comes from this article by Judy Shelton. She's a regular contributor to the WSJ op-ed page and has long advocated a return to the gold standard. I thought I'd highlight it because another gold standard advocate appeared on a different op-ed page recently (see below). Could the ...
Posted in Dollar, Fed, gold | 5 Comments »
Monday, November 17th, 2008
More from Citi's investor presentation...
There are plenty of slides talking about "Tier 1 Capital" and such. I never understood those ratios and don't think they'll be worth much in a panic situation as banks lose access to hard funding sources like consumer deposits. Using Citi's Tier 1 Capital ratio of ...
Posted in accounting, banking, bankruptcy, stocks, Wall Street | 4 Comments »
Monday, November 17th, 2008
In this investor presentation published on Citi's investor relations page today, the bank's "near-term" headcount target is listed at "~300k" (see slide 15). On the next slide, titled "Getting Fit---Fast" the target is listed at "<300k."
Currently the bank has 352k employees, down from peak employment over 370k. So this presentation ...
Posted in accounting, banking, credit crunch, stocks, Wall Street | 4 Comments »
Monday, November 17th, 2008
Some excerpts from Obama's interview with Steve Kroft.
On the bailout:
Kroft: The government has spent almost $300 billion out of the TARP program.
Mr. Obama: Right.
Kroft: Money that was set aside to help the financial industry. And nothing much has changed if you look at it. Nothing much has changed. It’s $300 ...
Posted in bailout, banking, bankruptcy, credit crunch, government spending, taxpayer issues | 3 Comments »
Sunday, November 16th, 2008
A good sign:
Goldman Sachs Group Inc said on Sunday its Chief Executive Lloyd Blankfein and six other top officials will not get bonuses for 2008.
Blankfein, Presidents and Co-Chief Operating Officers Jon Winkelried and Gary Cohn, Chief Financial Officer David Viniar, and three vice chairmen -- J. Michael Evans, Michael Sherwood ...
Posted in banking, credit crunch, stocks, Wall Street | 1 Comment »
Friday, November 14th, 2008
Below is a video montage of Peter Schiff's 2006-7 interviews on Fox Business Channel. I don't know what's more interesting: Schiff's prescience or his interlocutors' stupidity. I lost a lot of respect for Ben Stein when he signed up with the creationists. Here he advocates buying Merrill when it was ...
Posted in banking, bubble, credit crunch, Dollar, Economy, Fed, gold | 1 Comment »
Thursday, November 13th, 2008
Drudge is leading with a WashPost article this morning that notes Congress has taken no action yet to "fill the independent oversight posts established...when it approved the [$700 billion "Troubled Asset Relief Program"]....Nor has the first monitoring report required by lawmakers been completed, though the initial deadline has passed."
Maybe now ...
Posted in bailout, banking, Fed, government spending, politics, taxpayer issues | 6 Comments »
Wednesday, November 12th, 2008
To celebrate my birthday I thought I'd put in a few special requests. OptionARMageddon now averages about 3,000 readers per day---up from 30 when I started this a year ago---and I'd love to know who y'all are and what you do.
Here's the e-mail---optionarmageddon@gmail.com. Please use it to...
...send me information. ...
Posted in Uncategorized | No Comments »
