The US is starting to pare back its emergency support for banks and financial markets, Treasury secretary Tim Geithner said on Thursday, announcing that the state guarantee for the $2,500bn money market mutual fund industry will expire on schedule this month. Nearly a year after the collapse of Lehman Brothers helped tip the world into recession, Geithner said it was time to move from crisis response to recovery. He also backed a review by the FDIC bank regulator that is likely to end or restrict funding guarantees for banks.
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Showing posts with label banks. Show all posts
Showing posts with label banks. Show all posts
Friday, 11 September 2009
Thursday, 10 September 2009
Van der Moolen
Van der Moolen, the Dutch market maker and broker that unsuccessfully tried to transform itself into a high frequency trading shop after being muscled out of the US market by increasingly algorithmic-focused competition, on Thursday filed for bankruptcy.
The bankruptcy of VDM can be attributed to a combination of factors that appeared in a period of a number of years: big losses in the US, unsuccessful new initiatives like Online Trader, decreasing revenues in connection due to the financial crisis and a cost pattern that structurally exceeded the benefits.
Adieu
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The bankruptcy of VDM can be attributed to a combination of factors that appeared in a period of a number of years: big losses in the US, unsuccessful new initiatives like Online Trader, decreasing revenues in connection due to the financial crisis and a cost pattern that structurally exceeded the benefits.
Adieu
Monday, 7 September 2009
Looking for a job? Stay out of banking
Labour Day.
And all quiet on the other side of the Atlantic where we assume there are more green shoots than here on the Emerald Isle.
European banks face pressure to issue far more shares in order to meet a tough new global regulatory framework outlined at the weekend by G20 finance ministers which calls for much stronger capital buffers. The move follows criticism that some banks have used complex securities to meet more than half the existing regulatory requirements through the issuance of “hybrid” securities, which are more like debt than equity
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And all quiet on the other side of the Atlantic where we assume there are more green shoots than here on the Emerald Isle.
European banks face pressure to issue far more shares in order to meet a tough new global regulatory framework outlined at the weekend by G20 finance ministers which calls for much stronger capital buffers. The move follows criticism that some banks have used complex securities to meet more than half the existing regulatory requirements through the issuance of “hybrid” securities, which are more like debt than equity
Friday, 4 September 2009
Bankers and politicians
The leaders of Europe’s three largest nations, Britain, France and Germany, called on Thursday for “binding rules” to rein in bankers’ bonuses as G20 finance ministers prepared to meet in London this weekend. A joint letter from the UK’s Gordon Brown, Germany’s Angela Merkel and France’s Nicolas Sarkozy signalled that Europe is uniting behind specific proposals to link the size of bonuses to fixed pay and to bank performance over long periods. The three leaders also came out in favour of deferring awards and clawbacks in case of negative outcomes.
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Moodys is toast. Soon.
Berkshire Hathaway is selling more shares of Moody’s. It is clear that rating agencies are the next scapegoat for the financial crisis en Warren wants to get out before Congress is declaring these institutions toast.
A judge decided yesterday that these agencies have no place to hide.
(LA Times, 3/9/09): Credit-rating firms’ shares plunge on subprime-related court rulingInvestors who believe that major credit-rating firms should be held responsible for their disastrously optimistic ratings of subprime-mortgage bonds have won at least an interim victory.U.S. District Judge Shira Scheindlin in New York ruled late Wednesday that Moody’s Investors Service and Standard & Poor’s can’t invoke the 1st Amendment to hide from subprime-related legal challenges.The decision triggered heavy selling of shares of Moody’s parent Moody’s Corp. and S&P parent McGraw-Hill Cos. on Thursday. Moody’s slid $1.84, or 7%, to $24.26. McGraw-Hill’s shares tumbled $3.30, or 10.2%, to $29.01.
No panic, Warren is still sitting on a nice profit because his average purchase price I 10.40 USD.
We’re not there.
Yet.
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A judge decided yesterday that these agencies have no place to hide.
(LA Times, 3/9/09): Credit-rating firms’ shares plunge on subprime-related court rulingInvestors who believe that major credit-rating firms should be held responsible for their disastrously optimistic ratings of subprime-mortgage bonds have won at least an interim victory.U.S. District Judge Shira Scheindlin in New York ruled late Wednesday that Moody’s Investors Service and Standard & Poor’s can’t invoke the 1st Amendment to hide from subprime-related legal challenges.The decision triggered heavy selling of shares of Moody’s parent Moody’s Corp. and S&P parent McGraw-Hill Cos. on Thursday. Moody’s slid $1.84, or 7%, to $24.26. McGraw-Hill’s shares tumbled $3.30, or 10.2%, to $29.01.
No panic, Warren is still sitting on a nice profit because his average purchase price I 10.40 USD.
We’re not there.
Yet.
Tuesday, 1 September 2009
I kill you later, accumulator....
They are back – the accumulators. A financial product dubbed ‘I kill you later’.
Accumulators oblige investors to buy shares at a fixed price — usually a discount to prevailing market rates — at regular intervals. If the stock’s market price continues to gain, investors can pocket a hefty return; usually, the contracts include a kick-out feature that causes the contract to expire if shares rise above a certain level.
This product caused a lot of pain, especially in Asia. But we learn that UBS, HSBC, Citi and other are offering them again to wealthy investors.
Don’t touch it
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Accumulators oblige investors to buy shares at a fixed price — usually a discount to prevailing market rates — at regular intervals. If the stock’s market price continues to gain, investors can pocket a hefty return; usually, the contracts include a kick-out feature that causes the contract to expire if shares rise above a certain level.
This product caused a lot of pain, especially in Asia. But we learn that UBS, HSBC, Citi and other are offering them again to wealthy investors.
Don’t touch it
Friday, 28 August 2009
Goldman Sachs: the never ending story
There are many stories about Goldman Sachs these days.
A good thing.
I ask myself, how can a banker play golf in a Saturday knowing his bank initiated an economic downturn by taking risks he never understood in the first place. People are suffering, there is rising unemployment and as a banker you deny any responsibility
About Goldman. From de NY Post:
Treasury Secretary Hank Paulson let the cat out of the bag when he confessed on a cable TV show that it was "my job to talk regularly to market participants . . ."
Paulson had been the chairman of Goldman right before taking the job as head of Treasury.
So, if he felt it was his "job" to talk with people on Wall Street then who else would he speak with if not his old friends at Goldman?
The head of the US Treasury would, of course, know lots of secrets. In the olden days, this would be called "inside information."
And despite Paulson's contention it would be entirely inappropriate for him to discuss sensitive matters with people who could profit from the information. It is, in fact, illegal. And the penalty could be jail time.
What has been of particular interest to me is whether Paulson contacted his friends at Goldman after a lunch with Federal Reserve Chairman Ben Bernanke on Thurs., Aug. 16, 2007.
That day Wall Street seemed to get wind of the idea that the Fed was planning to do something big, and stock prices rallied strongly at the very end of that trading session. The very next morning Bernanke cut interest rates, the first of many such moves.
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A good thing.
I ask myself, how can a banker play golf in a Saturday knowing his bank initiated an economic downturn by taking risks he never understood in the first place. People are suffering, there is rising unemployment and as a banker you deny any responsibility
About Goldman. From de NY Post:
Treasury Secretary Hank Paulson let the cat out of the bag when he confessed on a cable TV show that it was "my job to talk regularly to market participants . . ."
Paulson had been the chairman of Goldman right before taking the job as head of Treasury.
So, if he felt it was his "job" to talk with people on Wall Street then who else would he speak with if not his old friends at Goldman?
The head of the US Treasury would, of course, know lots of secrets. In the olden days, this would be called "inside information."
And despite Paulson's contention it would be entirely inappropriate for him to discuss sensitive matters with people who could profit from the information. It is, in fact, illegal. And the penalty could be jail time.
What has been of particular interest to me is whether Paulson contacted his friends at Goldman after a lunch with Federal Reserve Chairman Ben Bernanke on Thurs., Aug. 16, 2007.
That day Wall Street seemed to get wind of the idea that the Fed was planning to do something big, and stock prices rallied strongly at the very end of that trading session. The very next morning Bernanke cut interest rates, the first of many such moves.
Monday, 24 August 2009
Inspiration
In case you were out on Friday, Meredith Whitney was at it again calling for continued bank failures. This time she is calling for some 300 to be the tally. But now Nouriel Roubini is out playing Dr. Doom again with the greater and greater case for more bank failures and for a double-dip recession. Speaking of recessions, the World Health Organization has a swine flu recession scenario out. It may sound a lot like the SARS recession call of 2003 and 2004.
Further:
• S&P 500 at new 2009 high. Up 50% from March closing low.
• Shoemaker Crocs still soaring... at new 52-week high and up 548% from March low.
• Natural gas hits 15-year low relative to "real money," gold.
• Major nanotech play Vecco Instruments at new 52-week high.
Downgrade
A downgrade doesn't have to hurt a stock.
First this:
The market for the hybrid debt of British banks was rather roiled last week
First there was news that Northern Rock would be deferring payment of its suboordinated debt coupons. Then then there was a mass-downgrade of the hybrid debt of banks including Lloyds and RBS, from ratings agency Fitch. In short, things are happening in the market — and they haven’t been all that good.
As a reminder, hybrid, or suboordinated debt, has characteristics of both equity and debt, and forms an important part of banks’ capital cushions.
On Tuesday, Northern Rock deferred coupon payments on some of its hybrid debt in an effort to conserve its capital base, which has fallen below minimum requirements since the bank was nationalised in 2008. The bond payments can legally be deferred without counting as a default — something which enables them to qualify as regulatory capital in the first place.
The thinking behind Fitch’s Thursday downgrade of RBS’ and Lloyds’ hybrid debt, meanwhile, is that there’s an increased risk of other such coupon deferrals after the European Commission introduced the concept of “burden-sharing” for bond - and shareholders. That’s a nice way of saying that bondholders will have to share some of the pain involved in bank bailouts — the lack of which formed a prime criticism of bank bailouts earlier this year.
Please note that not only Britsih Banks are involved in the Fitch action also other European banks got a letter where their hybrid debt was downgraded.
First there was news that Northern Rock would be deferring payment of its suboordinated debt coupons. Then then there was a mass-downgrade of the hybrid debt of banks including Lloyds and RBS, from ratings agency Fitch. In short, things are happening in the market — and they haven’t been all that good.
As a reminder, hybrid, or suboordinated debt, has characteristics of both equity and debt, and forms an important part of banks’ capital cushions.
On Tuesday, Northern Rock deferred coupon payments on some of its hybrid debt in an effort to conserve its capital base, which has fallen below minimum requirements since the bank was nationalised in 2008. The bond payments can legally be deferred without counting as a default — something which enables them to qualify as regulatory capital in the first place.
The thinking behind Fitch’s Thursday downgrade of RBS’ and Lloyds’ hybrid debt, meanwhile, is that there’s an increased risk of other such coupon deferrals after the European Commission introduced the concept of “burden-sharing” for bond - and shareholders. That’s a nice way of saying that bondholders will have to share some of the pain involved in bank bailouts — the lack of which formed a prime criticism of bank bailouts earlier this year.
Please note that not only Britsih Banks are involved in the Fitch action also other European banks got a letter where their hybrid debt was downgraded.
However, on the Belgian stock exchange is KBC (bank) rising another 5% today.
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Friday, 21 August 2009
Spain: a warning...
It’s Friday.
Fridays are never the same.
In what shape they come, they always look special.
Now, consider this piece of research about Spanish banks coming from the house Variant Perceptions.
The consequences can be dire for Europe
Spain had the mother of all housing bubbles. To put things in perspective, Spain now has as many unsold homes as the US, even though the US is about six times bigger. Spain is roughly 10% of the EU GDP, yet it accounted for 30% of all new homes built since 2000 in the EU. Most of the new homes were financed with capital from abroad, so Spain’s housing crisis is closely tied in with a financing crisis.
Fridays are never the same.
In what shape they come, they always look special.
Now, consider this piece of research about Spanish banks coming from the house Variant Perceptions.
The consequences can be dire for Europe
Spain had the mother of all housing bubbles. To put things in perspective, Spain now has as many unsold homes as the US, even though the US is about six times bigger. Spain is roughly 10% of the EU GDP, yet it accounted for 30% of all new homes built since 2000 in the EU. Most of the new homes were financed with capital from abroad, so Spain’s housing crisis is closely tied in with a financing crisis.
The impact on the banking sector will be severe. Consider this: the value of outstanding loans to Spanish developers has gone from just €33.5 billion in 2000 to €318 billion in 2008, a rise of 850% in 8 years. If you add in construction sector debts, the overall value of outstanding loans to developers and construction companies rises to €470 billion. That’s almost 50% of Spanish GDP. Most of these loans will go bad.
Spanish banks, in our view, are now facing a very bleak outlook. Spain’s unemployment rate reached over 17%; there are now four million unemployed Spaniards and over one million families with not a single person employed in the family.We argue and will document anecdotally in this report that:
• The real estate crash in Spain is worse than is widely believed, much as the subprime problem was much worse than people believed
• Spanish banks are hiding their losses and rolling over debt to zombie companies, much as Japan did in the last decade
• Investors are deluding themselves if they believe that Spanish banks are among the strongest in the world. (This is a new theme. See Forbes’s latest “Spanish Banks In Top Form” for an example of the new fawning articles on Spanish banks.)
If we are right, Spain will soon have zombie banks like Japan and it will face a prolonged period of deflation. However, Spain will be much worse.
Why are the banks involved?
Because they wanted to hide the situation
Spanish banks are now the largest real estate holders in Spain. They have come to own properties through many different avenues. In order to hide from the effects of the real estate crash, Spanish banks have been buying properties before the loans on them go bad and trying to dispose of them through their own real estate companies. They have also come to own dozens of thousands of homes through debt for equity swaps. Estimates put the value of property repossessed or swapped for debt by Spanish banks at about €16 billion. Consider the following: Spanish banks are now running their own real estate companies and have websites set up to move their stock. Among selling points are: pricing discounts of 25-50%, financial terms of Euribor plus 0% over 40 years, and guarantees to re-purchase the property in the future.
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Why are the banks involved?
Because they wanted to hide the situation
Spanish banks are now the largest real estate holders in Spain. They have come to own properties through many different avenues. In order to hide from the effects of the real estate crash, Spanish banks have been buying properties before the loans on them go bad and trying to dispose of them through their own real estate companies. They have also come to own dozens of thousands of homes through debt for equity swaps. Estimates put the value of property repossessed or swapped for debt by Spanish banks at about €16 billion. Consider the following: Spanish banks are now running their own real estate companies and have websites set up to move their stock. Among selling points are: pricing discounts of 25-50%, financial terms of Euribor plus 0% over 40 years, and guarantees to re-purchase the property in the future.
Tuesday, 18 August 2009
This feels not good...
The Bank of International Settlements published its outlook for the economy.
Here’s a snippet
So far, the crisis has developed in five more or less distinct stages of varying intensity, starting with the subprime mortgage-related turmoil between June 2007 and mid-March 2008 (Graph II.1). Following this first stage, during which the primary focus was on funding liquidity, bank losses and writedowns continued to accumulate as the cyclical deterioration slowly translated into renewed asset price weakness. As a result, in the second stage of the crisis, from March to mid-September 2008, funding problems morphed into concerns about solvency, giving rise to the risk of outright bank failures. One such failure, the demise of Lehman Brothers on 15 September, triggered the third and most intense stage of the crisis: a global loss of confidence, arrested only after unprecedented and broad-based policy intervention. Stage four, from late October 2008 to mid-March 2009, saw markets adjust to an increasingly gloomy global growth outlook amid uncertainties over the effects of ongoing government intervention in markets and the economy. Stage five, beginning in mid-March 2009, has been marked by signs that markets are starting to show some optimism in the face of still largely negative macroeconomic and financial news, even as true normalization.
The full report can be found here Sphere: Related Content
Is this institution broke?
Oh my...
Hello to the lads of Saxo Bank.
According to an August 12 report from investment bank Saxo Bank, the three bank failures on August 7 decreased the FDIC's Deposit Insurance Fund (DIF) to a measly $648.1 million. Well, five more banks failed last Friday, bringing the total this year to 77. And in the largest bank failure since Washington Mutual, Alabama-based Colonial BancGroup depleted the DIF by $2.8 billion. Community Bank of Nevada also failed, sucking another $781.5 million from the DIF. So according to Saxo Bank's numbers, the FDIC is officially bankrupt...
But in the FED we trust. The government will print more money in order to keep this institution alive. However, more trouble is brewing as the number of non-performing loans is still on the rise.
According to an August 12 report from investment bank Saxo Bank, the three bank failures on August 7 decreased the FDIC's Deposit Insurance Fund (DIF) to a measly $648.1 million. Well, five more banks failed last Friday, bringing the total this year to 77. And in the largest bank failure since Washington Mutual, Alabama-based Colonial BancGroup depleted the DIF by $2.8 billion. Community Bank of Nevada also failed, sucking another $781.5 million from the DIF. So according to Saxo Bank's numbers, the FDIC is officially bankrupt...
But in the FED we trust. The government will print more money in order to keep this institution alive. However, more trouble is brewing as the number of non-performing loans is still on the rise.
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Monday, 17 August 2009
Swedbank ... what's in a name?
More trouble for Baltic countries as S&P downgrades Latvia and Estonia. What more has to come? At the end they will follow the IMF in order to obtain a financial Life line.
Is there any choice? Look to Latvia which saw its GDP for 2009Q2 contracting with another 19,6% after a drop of 18% in quarter one.
Look to the SEK. Given the high levels of Swedish banking exposure, the Swedish banks are not out of the woods. Neither is the country.
‘Swedbank sweats’ was the Financial Time titling this morning as loan impairments originating from the Baltic region are still growing meteorically.
Is there any choice? Look to Latvia which saw its GDP for 2009Q2 contracting with another 19,6% after a drop of 18% in quarter one.
Look to the SEK. Given the high levels of Swedish banking exposure, the Swedish banks are not out of the woods. Neither is the country.
‘Swedbank sweats’ was the Financial Time titling this morning as loan impairments originating from the Baltic region are still growing meteorically.
Not good at all.
Public traded companies with non performing loans
Bloomberg was running an article about the non performing loans on the bankbooks. You can find the article here.
Remember: US lenders that own non performing loans that equal 5 percent or more of their holdings are in danger of being shut down, because this level is considered as critical for the survival of a financial institution.
Nonperforming loans can eat into a company’s earnings and deplete cash, leaving banks below the minimum capital levels required by regulators. Three lenders with nonaccruing ratios of at least 6.2 percent as of March were closed last week. In addition, Chicago-based Corus Bankshares Inc., Austin-based Guaranty Financial Group Inc. and Colonial BancGroup Inc. in Montgomery, Alabama, each with ratios of at least 6.5 percent, said in the past month that they expect to be shut
Well, Colonial BancGroup was shut on Friday.
Even better: another 150 public traded companies seem to be in danger.
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Remember: US lenders that own non performing loans that equal 5 percent or more of their holdings are in danger of being shut down, because this level is considered as critical for the survival of a financial institution.
Nonperforming loans can eat into a company’s earnings and deplete cash, leaving banks below the minimum capital levels required by regulators. Three lenders with nonaccruing ratios of at least 6.2 percent as of March were closed last week. In addition, Chicago-based Corus Bankshares Inc., Austin-based Guaranty Financial Group Inc. and Colonial BancGroup Inc. in Montgomery, Alabama, each with ratios of at least 6.5 percent, said in the past month that they expect to be shut
Well, Colonial BancGroup was shut on Friday.
Even better: another 150 public traded companies seem to be in danger.
Tuesday, 28 July 2009
Nothing new... but still disturbing
Fitch has released a comprehensive study on derivatives held by various corporations and has come out with some disturbing results: the bulk of the derivative risk is concentrated not merely in the "financial company" category (99.7%) but in a subset of just five companies, which account for an "overwhelming majority" of derivative assets and liabilities.
The companies in question (Total Notional Derivatives: Assets & Liabilities, $ in Trillions)
· JP Morgan:$81.7;
· Bank of America:$80.0;
· Citigroup:$31.5;
· Morgan Stanley:$39.3, and of course
· Goldman Sachs: $47.8 (this is an OCC estimate: Goldman has not disclosed notional amounts in their derivative book, only # of contracts);
If you want a preview of what the Basel III definition of "Too Big To Fail" will look like, the above five companies is a great place to start.
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The companies in question (Total Notional Derivatives: Assets & Liabilities, $ in Trillions)
· JP Morgan:$81.7;
· Bank of America:$80.0;
· Citigroup:$31.5;
· Morgan Stanley:$39.3, and of course
· Goldman Sachs: $47.8 (this is an OCC estimate: Goldman has not disclosed notional amounts in their derivative book, only # of contracts);
If you want a preview of what the Basel III definition of "Too Big To Fail" will look like, the above five companies is a great place to start.
Thursday, 23 July 2009
A small loss is only normal, isn't it?
In the Chinese Business News of June 29 there was an article stating that government aid was funneled into the stock market and in real estate speculation.
Chinese new bank loans worth about an estimated 1.16 trillion yuan ($170 billion) were invested in the stock market in the first five months of this year, citing a government economist. That’s 20 percent of the 5.8 trillion yuan loans banks extended in the period, the Shanghai-based newspaper said, citing Wei Jianing, a deputy director at the macro-economics department of the Development and Research Center under China’s State Council. “Where did it go? It’s undeniable that a portion of the lending may have flowed into stock and real estate markets and triggered the rebound in these two markets,” the former official said at a financial forum in Ningbo city in eastern China.
Now of course, none of such thing happen in Europe or in the States, right?
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Chinese new bank loans worth about an estimated 1.16 trillion yuan ($170 billion) were invested in the stock market in the first five months of this year, citing a government economist. That’s 20 percent of the 5.8 trillion yuan loans banks extended in the period, the Shanghai-based newspaper said, citing Wei Jianing, a deputy director at the macro-economics department of the Development and Research Center under China’s State Council. “Where did it go? It’s undeniable that a portion of the lending may have flowed into stock and real estate markets and triggered the rebound in these two markets,” the former official said at a financial forum in Ningbo city in eastern China.
Now of course, none of such thing happen in Europe or in the States, right?
Wednesday, 15 July 2009
Another blow for banks
Moody’s Investor Service announced that they are going to modify the rating methodology applied to structured finance securities insured by financial guarantors aka monolines. From the FT
New York, July 14, 2009 — Moody’s Investors Service is modifying the rating methodology it applies to structured finance securities insured by financial guarantors. Specifically, starting September 1, 2009, Moody’s will withdraw the ratings on those structured finance securities insured by guarantors that have financial strength ratings below Baa3 (that is non-investment grade) if either of two conditions are met: Moody’s is unable to determine an underlying rating (i.e., absent consideration of the guaranty) on the security or the issuer has requested that theguaranty constitute the sole credit consideration.
New York, July 14, 2009 — Moody’s Investors Service is modifying the rating methodology it applies to structured finance securities insured by financial guarantors. Specifically, starting September 1, 2009, Moody’s will withdraw the ratings on those structured finance securities insured by guarantors that have financial strength ratings below Baa3 (that is non-investment grade) if either of two conditions are met: Moody’s is unable to determine an underlying rating (i.e., absent consideration of the guaranty) on the security or the issuer has requested that theguaranty constitute the sole credit consideration.
Below is a list of securities impacted by the new policy whereby their ratings will be withdrawn on September 1, 2009 unless prior to that date Moody’s is a) provided sufficient information to determine the underlying rating or b) informed by the issuer in the case of GMAC Certificados Bursatiles UDIS MXMACFW 07-5U to no longer rate the security solely based on the guaranty.
The aforementioned list is deals mostly insured by monolines like MBIA and Ambac.
We remember that these structured products got a credit enhancement in the form of a guarantee of payment of principle and interest to bond issuers.
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The aforementioned list is deals mostly insured by monolines like MBIA and Ambac.
We remember that these structured products got a credit enhancement in the form of a guarantee of payment of principle and interest to bond issuers.
Friday, 10 July 2009
Irish banks are losing ground... once more
In Dublin fair city, where girls are so pretty, the Irish banking sector is slipping away. Anglo Irish Bank, nationalized, announced they probably would halt payment of interests on part of their bonds. They cite the European Commission as source of this action in order to get the 3 bln EUR investment approved which was done earlier this year by the government.
Allied Irish and Bank of Ireland are trading substantially lower on this news.
I like the comments of Brett Steenbarger, intelligent as always:
Commodities have become a pretty good proxy for sentiment regarding the prospects for global economic recovery, as growth can be expected to generate increased demand for oil, industrial metals, and food stuffs. After breaking out of the base extending from December through April, commodities (DBC, above) have pulled back into that base, as investors have renewed questions regarding growth prospects. With that, inflation themes have taken a back seat to deflationary concerns, strengthening the U.S. dollar and sending Treasury prices higher (and yields lower).
For investors, nothing is more important than scoping out the prospects for inflation vs. deflation. The movements of the various asset classes are a kind of voting mechanism regarding those prospects and, thus far, are voting for continued economic weakness.
And then there is this: http://invislib.blogspot.com/ . The invisible library. If you want to look to something different this weekend than this is it. The Invisible Library is a collection of books that don’t exist, except in the pages of other books. It is physically manifesting at the Tenderpixel Library in London, but will resume invisibility after 12 July.
Time’s up folks. We close the laptop and stroll to the local pub for having a good Guinness. Take care and everyone a jolly good weekend. Sphere: Related Content
Allied Irish and Bank of Ireland are trading substantially lower on this news.
I like the comments of Brett Steenbarger, intelligent as always:
Commodities have become a pretty good proxy for sentiment regarding the prospects for global economic recovery, as growth can be expected to generate increased demand for oil, industrial metals, and food stuffs. After breaking out of the base extending from December through April, commodities (DBC, above) have pulled back into that base, as investors have renewed questions regarding growth prospects. With that, inflation themes have taken a back seat to deflationary concerns, strengthening the U.S. dollar and sending Treasury prices higher (and yields lower).
For investors, nothing is more important than scoping out the prospects for inflation vs. deflation. The movements of the various asset classes are a kind of voting mechanism regarding those prospects and, thus far, are voting for continued economic weakness.
And then there is this: http://invislib.blogspot.com/ . The invisible library. If you want to look to something different this weekend than this is it. The Invisible Library is a collection of books that don’t exist, except in the pages of other books. It is physically manifesting at the Tenderpixel Library in London, but will resume invisibility after 12 July.
Time’s up folks. We close the laptop and stroll to the local pub for having a good Guinness. Take care and everyone a jolly good weekend. Sphere: Related Content
Thursday, 9 July 2009
Do banks ever learn their lesson
If someone thought that the game changed, think again.
This comes from Max Keiser and Stacy Herbert:
Morgan Stanley plans to repackage a downgraded collateralized debt obligation backed by leveraged loans into new securities with AAA ratings in the first transaction of its kind, said two people familiar with the sale.
Morgan Stanley is selling $87.1 million of securities that it expects to receive top AAA ratings and $42.9 million of notes graded Baa2, the second-lowest investment grade by Moody’s Investors Service, according to marketing documents obtained by Bloomberg News. The bonds were created from Greywolf CLO I Ltd., a CDO arranged in January 2007 by Goldman Sachs Group Inc. and managed by Greywolf Capital Management LP, an investment firm based in Purchase, New York.
Now, Moodys downgraded the Aaa tranche of this CDO with six notches to A3 because its default rate for loans in the Aaa tranche soared to 7 percent. No problem for Morgan Stanley. They managed to repackage this paper throwing in some credit enhancement, collateral, reducing the poorly performing assets, make the equity tranche a little larger and throw in a CDS and hop… the same loan pool gets another Aaa rating.
Everybody is repackaging again. Goldman plans to sell 200 mln USD of repackaged commercial mortgage-backed paper soon.
And attention folks: this is all approved by your local regulators.
On the other hand: somewhere there is still demand for this kind of paper. Maybe it’s your own pension fund buying...
Sphere: Related Content
This comes from Max Keiser and Stacy Herbert:
Morgan Stanley plans to repackage a downgraded collateralized debt obligation backed by leveraged loans into new securities with AAA ratings in the first transaction of its kind, said two people familiar with the sale.
Morgan Stanley is selling $87.1 million of securities that it expects to receive top AAA ratings and $42.9 million of notes graded Baa2, the second-lowest investment grade by Moody’s Investors Service, according to marketing documents obtained by Bloomberg News. The bonds were created from Greywolf CLO I Ltd., a CDO arranged in January 2007 by Goldman Sachs Group Inc. and managed by Greywolf Capital Management LP, an investment firm based in Purchase, New York.
Now, Moodys downgraded the Aaa tranche of this CDO with six notches to A3 because its default rate for loans in the Aaa tranche soared to 7 percent. No problem for Morgan Stanley. They managed to repackage this paper throwing in some credit enhancement, collateral, reducing the poorly performing assets, make the equity tranche a little larger and throw in a CDS and hop… the same loan pool gets another Aaa rating.
Everybody is repackaging again. Goldman plans to sell 200 mln USD of repackaged commercial mortgage-backed paper soon.
And attention folks: this is all approved by your local regulators.
On the other hand: somewhere there is still demand for this kind of paper. Maybe it’s your own pension fund buying...
Tuesday, 7 July 2009
No job today... what about tomorrow
What about this message:
If you are 35 years old, have only ever worked in the City and have lost your job, then the chief executive of Britain’s biggest listed recruitment company has a grim message for you on the prospect of a recovery in financial sector employment: “Those jobs have gone and they’re not coming back any time soon.”
These are the words of Alistair Cox from Hays Recruitment.
And I think the guy is right. Especially with what the ECB has in mind, things never will come back as they were. A draft report is expected today from the EU and this report states that there us a strong case for curbing existing rules on banks’ funding needs, accounting reforms and other policy changes in order to prohibit banks to lever themselves again to the tune of 30-1.
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These are the words of Alistair Cox from Hays Recruitment.
And I think the guy is right. Especially with what the ECB has in mind, things never will come back as they were. A draft report is expected today from the EU and this report states that there us a strong case for curbing existing rules on banks’ funding needs, accounting reforms and other policy changes in order to prohibit banks to lever themselves again to the tune of 30-1.
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