Michael Lewis, of Liar’s Poker fame, gives an elegant explanation of why Goldman got its subprime position right when everyone else on the Street was disastrously wrong. And I mean elegant in the mathematical sense: it fits known facts and has few moving parts. As Lewis tells it, Goldman did not use the largely impotent […]
Read more...Martin Wolf’s current comment is great fun. He makes a recommendation which is logical and well argued but so contrary to the prevailing orthodoxy that it is sure to elicit a lot of ire. And I guarantee it will be misconstrued as well. Wolf notes that banks (and we can include investment banks) have succeeded […]
Read more...Never ones to miss an opportunity to lose money, the top Japanese banks, finally having recovered from lending against wildly overvalued collateral, and then suffering nearly two decades of working out zombie loans (or more accurately, being insolvent but being allowed to operate anyhow, since reviving the crappy banking sector one has is easier than […]
Read more...Bloomberg has come across some correspondence with the SEC that sheds light on Goldman’s much commented upon “net short” subprime position. Note, despite the fulminations of certain members of the media, it is not at all clear that being short creates any liability whatsoever, regardless of whether customers may feel “had” or not. On secondary […]
Read more...Yesterday, the Wall Street Journal reported that Merrill and Citigroup were looking for more funding to compensate for pending writedowns. The Journal said Merrill was seeking $3-$4 billion, Ciit $10 billion, and the losses the firms could take on mortgage-related debt could be as high as $25 billion. That number already appears to be out […]
Read more...Forgive comparatively terse comments tonight. The Wall Street Journal reports that Citi and Merrill could have additional losses of up to $25 billion between them and are scrambling to secure foreign funding commitments of $3-$4 billion at Merrill and up to $10 billion at Citi While the article doesn’t say so clearly, the goal is […]
Read more...I for one enjoy it when those well versed in Wall Street lingo and logic go to the trouble of using it to demonstrate that the market for what passes for talent in the securities industry is very inefficient. And the Financial Times is more willing to challenge how the Masters of the Universe are […]
Read more...jck at Alea pointed to this deceptively important Reuters story, “Ability to track risk has shrunk ‘forever’ -Moody’s,” which says that financial innovation has created information asymmetries that make it impossible for participants to understand their exposures fully. That position may cynically be seen as a defense of the rating agencies’ poor performance, but the […]
Read more...The Wall Street Journal broke the story that Bear Stearns’ 74 year old chairman James Cayne has told board members he will give up his CEO role but stay on as chairman. 57-year old president and investment banker Alan Schwartz is expected to assume the CEO post. I complained back in November that the Wall […]
Read more...Merrill Lynch is under investigation in Massachusetts for having sold some CDOs that fell 91% in value in less than a year to Springfield, a municipality that was just getting out from under its own fiscal woes. The amount at issue isn’t large by Wall Street standards; the CDOs in question fell by $13 million. […]
Read more...William Cohan, the author of the popular and award-winning book The Last Tycoons: The Secret History of Lazard Frères & Co gives a badly flawed account the past in his comment, “Mixed portents for Wall Street’s rescuers,” in today’s Financial Times, and therefore makes a misleading comparison. Cohen goes through the recent foreign investments in […]
Read more...For those who may be too young to have been around in his heyday, Henry Kaufman, aka Dr. Doom, was one of the preeminent economists during the early to mid 1980s, when his firm, Salomon Brothers, ruled the bond markets. Kaufman had a particularly well honed ability to read interest rate trends, no mean skill […]
Read more...The theme du jour, at least in the world of Dow Jones, is the sorry condition of the financial services industry. While the basic thrust is nothing new, some of the data point are revealing. The Journal’s Heard on the Street column tells us that banks like Citigroup and HSBC are likely to sell business […]
Read more...We had a story earlier this morning on hard times in the financial services industry, but this merited separate comment. There is no institutional memory on Wall Street. In superheated M&A markets, investment banks start providing bridge loans even though they should know better. Inevitably, the party ends, credit markets back up, and the securities […]
Read more...Goldman’s William Tanona predicts further sizable losses at major brokerage firms, with Citi and Merrill taking particularly large hits. Tanona also expects Citigroup to cut its dividend. From Bloomberg: Citigroup Inc., JPMorgan Chase & Co. and Merrill Lynch & Co. may write down an additional $34 billion in securities linked to the collapse of the […]
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