According to Bloomberg, there was a banking confessional of sorts in Parliament: Citigroup Inc., the biggest U.S. bank by assets, lost more money than it made from financial instruments based on U.S. subprime mortgages, a senior company executive said in a meeting at the British Parliament. William Mills, chief executive officer of Citigroup’s markets and […]
Read more...A Bloomberg exclusive story reports that the efforts to clean up the relationship between equity analysts and corporate clients appear have failed to produce more candid ratings. While there is no sign of the overt corruption of the dot-com era, sell ratings are even scarcer than before, despite considerable and obvious signs of stress in […]
Read more...Many commentators on the bailout of E*Trade by hedge fund Citadel focused on either the terms of the deal (costly to E*Trade) or the fact that Citadel, like some other risk-minded investors, are starting to pick and choose among distressed mortgage assets, a sign they believe that the bottom is nigh. But a Reuters story, […]
Read more...While the Financial Times has a wealth of journalistic talent, one of its standouts is capital markets editor Gillian Tett. She reported on the signs of trouble in the credit markets when the world at large thought everything was hunky-dory. One of her many prescient pieces was an article in January that used the fact […]
Read more...Bloomberg reports that JP Morgan analysts forecast that large bank exposure to CDO-related losses could reach as high as $77 billion. Note that they have written off more than half that amount already. They also estimated aggregate losses at $260 billion. We have come up with larger back-of-the-envelope loss estimates, but that was based on […]
Read more...Having made a few back-of-the-envelope calculations in this blog, and then having had readers jump on me, I know what fraught exercises they are. But at the same time, a lot of information is bandied about, and you can learn a lot by connecting the dots (although sometimes what you learn is that you didn’t […]
Read more...Goldman’s high profile and formerly highly successful quantitative hedge fund, Global Alpha, was one of the biggest casualties of turbulent markets in August, shedding 22.5% of its value. The firm orchestrated a shorting up of another one of its quant hedge funds (Global Equity Opportunities), putting in $2 billion of new Goldman money and raising […]
Read more...When Sallie Krawcheck (now head of wealth management at Citigroup) was an equity analyst covering Wall Street at Sanford Bernstein, she remarked, “It’s better to be an employee of an investment bank than a shareholder.” This year’s results certainly bear out her observation. From Bloomberg: Shareholders in the securities industry are having their worst year […]
Read more...Perhaps I am attributing too much importance to a single speech, but the Minneapolis Fed President Gary Stern’s “Credit Market Developments: Lessons for Central Banking,” reveals a lot of what is wrong about the way policymakers are thinking about our credit crisis. And if Stern’s position is widely held within the Fed, we are in […]
Read more...A colleague was so kind as to send me the text of a speech given at the Graham & Dodd breakfast a few weeks ago by David Einhorn, CEO of hedge fund Greenlight Capital. The speech has gotten play only in some personal-investment-oriented blogs like Seeking Alpha and Naked Shorts. Even though they are fine […]
Read more...Did you think the Bear Stearns hedge fund drama of the summer was over? We may see a low-budget sequel. The Financial Times reports that aggrieved shareholders of one of the failed Bear funds, High-Grade Structured Credit Strategies Enhanced Leverage (Overseas), have assumed control. US based investors get to vote on Friday (no guess as […]
Read more...Bloomberg reports that at a Merrill Lynch sponsored investor event, both BlackRock CEO Larry Fink and Goldman CEO Lloyd Blankfein gave negative readings for the credit market, particularly CDOs and subprimes. Goldman is putting its money where its mouth is and is short mortgage-related debt. BlackRock also said it was in contact with the Treasury […]
Read more...Monday, the Financial Times’ MergerMarket blog (hat tip Felix Salmon) gave a sighting of CDO market prices, and it wasn’t pretty: However, AAA rated subprime CDOs currently trade from the high single digits on junior tranches to 60% of face on super senior tranches, according to a sellsider and a buysider….. Merrill Lynch in the […]
Read more...Reader Bernard pointed us to a story in Fortune, “Wall Street playing with more funny money.” The cause for pause is the rising tide of Level 3 assets. By way of background, investment banks and other financial firms are subject to new accounting rules that require them to specify how they value their assets. Level […]
Read more...Readers likely know that new accounting standards are forcing investment banks and other financial firms to specify how the value the assets on their balance sheet. Level 1 assets are ones whose prices can be readily obtained (i.e., they trade actively); Leve 2 assets may not trade often, but they are very similar to assets […]
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