The securities industry is highly cyclical, and like the markets they trade in, Wall Street firms are prone to overshoot and undershoot. Executives cut too deeply in downturns, resolve not to repeat that mistake when they rebuild staffs in recoveries, keep hiring even when markets look overheated, and then repeat. To illustrate how extreme these […]
Read more...A Bloomberg story informs us that Wall Street bonuses may be down for the first time in five years. Why has it taken this long to figure that out? At this point, the estimated decline in bonuses is only 5%, which given the carnage, is rounding error. Admittedly, the Street had a spectacularly strong first […]
Read more...According to Bloomberg, Moody’s has altered investors to the possibility of a repeat of the 1998 Long Term Capital Management hedge fund crisis. We should be so lucky. As we have said before, the LTCM crisis has been widely, and in our opinion, mistakenly seen as a vindication of the workings of the financial system. […]
Read more...When it rains, it pours. Here many hedge funds are braced for investor redemptions today, just when some banks are starting to refuse to lend against subprime holdings. Now this story isn’t as dramatic as it might seem. It appears that only a few banks have stopped lending against subprime-related debt. And the ones named, […]
Read more...Andy Xie, who until last year was Morgan Stanley’s chief Asia economist (he apparently made himself unpopular by being too candid about Singapore), gives a blunt critique of last week’s liquidity infusions by central bankers in “It’s time for central bankers to stop bailing out markets” in the Financial Times. Xie’s conclusion is that the […]
Read more...Bloomberg reports that analysts at Sanford Bernstein estimate that Citi will suffer up to $3 billion in losses this quarter due to subprime and LBOs writeoffs: The New York-based company may lose between $1.2 billion and $1.5 billion on loans to buyout firms and between $500 million and $1 billion on subprime mortgages in the […]
Read more...An excellent article by Willem Buiter (Professor of European Political Economy at the London School of Economics and formerly a member of the Monetary Policy Committee of the Bank of England and Chief Economist at the European Bank for Reconstruction and Development) and Anne Sibert (Professor and Head of the School of Economics, Mathematics and […]
Read more...Goldman, in a brilliant bit of legerdemain, invested (along with partners such as CV Starr and Perry Partners) $3 billion into its troubled quant fund Global Equity Opportunities. From its press release: Many funds employing quantitative strategies are currently under pressure as recent conditions have resulted in significant market dislocation. Across most sectors, there has […]
Read more...Live by the sword, die by the sword. Bloomberg reports that Goldman’s formerly $10 billion hedge fund, Global Alpha, is down 26%, following a decline last year of 9%. Although there have been rumors of big losses at Global Alpha and elsewhere, this news was posted on Bloomberg after the markets closed. One has to […]
Read more...As readers doubtless know, a nasty day in the markets yesterday was followed by distress overnight as the Japanese central bank injected funds into the marketplace and the European Central Bank added liquidity a second day, following an unprecedented, unlimited injection Thursday. The Dow opened down over 100 points, and due to a spike up […]
Read more...The news item of the morning (aside from the markets suffering a loss of confidence) is that BNP Paribas has blocked withdrawals from three funds that had an aggregate of $2.2 billion in assets, which had fallen by 20% in a mere two weeks. Note that this action is not the direct result of subprime […]
Read more...Currently docked in Marseille (managed to get a Financial Times yesterday in Monaco, so I feel slightly less cut off from the symbol world) and catching up on the grim market news of yesterday. It seems that the equity markets are getting the message that things are bad enough in the credit markets so as […]
Read more...The era of lax lending is inflicting damage on one of its biggest perps, namely, investment banks. Wall Street firms, overeager to win funding mandates from private equity firms, agreed to terms that were very much in favor of the private equity firms. And now the LBO firms are holding them to their financing commitments, […]
Read more...Jim Rogers, who is by no means a card carrying bear, thinks the US housing market, and therefore homebuilder and investment bank stocks, still have further to fall. And the news of the last few days provides confirming data points. First, this morning’s Wall Street Journal has as a page one story a news item […]
Read more...Many observers had expected quite a few hedge funds that had subprime exposures to report significant losses for June, and there have been rumors of funds that had begun the liquidation process because it was apparent they were too badly damaged to survive. But the specter of investors clamoring to pull funds out of a […]
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