The Financial Times and the Wall Street Journal give complementary updates on the unraveling of the Bear Stearns subprime hedge funds, the larger of which was the High Grade Structured Credit Strategies Enhanced Leverage Fund. Merrill Lynch and Deutsche Bank put up over $1 billion in assets seized from the funds for sale today. Some […]
Read more...In recent years, financial services firms have become increasingly adept at the game of “pin the liability on the bagholder.” Wall Street players structure complicated new products and seem peculiarly able to strip a disproportionate share of the economic value out as up-front fees. I say “peculiarly” simply because investors buy this stuff, even the […]
Read more...A Bloomberg story tells us that Japanese retail investors are undermining the forecasts (and worse, trades) of large investment banks. The banks think the yen is seriously undervalued. Unfortunately, when it appreciates, retail investors buy more assets in countries that offer more yield, which leads them to sell yen, keeping the currency in its place. […]
Read more...A good article in the American Prospect by Barbara Dreyfus gives an overview of the state of play in the hedge fund industry and reviews the causes (considerable) for concern. The article is very much for the generalist reader and misses some points that are important (for example, the role of leverage in most hedge […]
Read more...When the story broke of trouble at a Bear Stearns hedge fund, the High-Grade Structured Credit Strategies Enhanced Leverage Fund, that led it to auction $4 billion of its holdings to raise cash, we speculated that this might wind up being the beginning of a liquidation. That scenario now appears likely. The Wall Street Journal […]
Read more...Readers may recall that a Bear Stearns hedge fund, the High-Grade Structured Credit Strategies Enhanced Leverage Fund, scheduled an auction for $4 billion of mortgage securities to raise cash. That’s a pretty unusual move, a sign of acute distress. Although Bear Stearns officials initially denied that the big sale was to meet margin calls, we […]
Read more...The funny thing about the oft-repeated George Santayana saying, “Those who cannot remember the past are condemned to repeat it,” is that it is generally applied to historical events, like the folly of launching an attack on Russia that might extend into the winter. But these days, in the financial markets, with so many people […]
Read more...This story, which describes the in extremis sale of $4 billion of bonds by a Bear Stearns hedge fund, “Bear’s Fund Is Facing Mortgage Losses,” is currently the lead story on the Wall Street Journal’s website, so it is likely to get page one coverage in the print edition. The fund, the High-Grade Structured Credit […]
Read more...What the Fed and the Treasury would like take away, the SEC gives, and then some. The Fed is (finally) getting worried about systemic risk, and in this Financial Times story, the Treasury Department (which usually stays clear of this sort of thing, generally deferring to the Fed) says that it is concerned about hedge […]
Read more...I must confess that I have stayed away from this controversy, in which various unnamed hedge funds are grousing about investment banks, Bear Stearns in particular, somehow mucking with the assets underlying certain mortgage-related instruments, modifying them so as to help stressed borrowers. The hedgies are upset because they allege that the investment banks are […]
Read more...Readers may notice today that we are a bit heavy on Financial Times stories. In part, that’s because the FT has a healthy respect for the fixed income markets. Political consultant and pretty scary guy James Carville once remarked, “I used to think if there was reincarnation, I wanted to come back as the President […]
Read more...Michael Panzner pointed us to a Bloomberg column by John Berry, “Fed Officials Fret Another `Russia’ May Occur.” Frankly, we are delighted to read this. It is high time the Fed woke up and took stock of the excesses taking place in virtually every asset class. Not only do we have very high liquidity, asset […]
Read more...Readers doubtless know that I am very fond of the Financial Times. I therefore find it distressing when a writer, particularly a capable writer, puts out a story that is enough off base as to be misguided. Case in point: “Bulge-bracket banking model has spawned monsters” by Tony Jackson. He is unhappy about the way […]
Read more...A very good post by Roger Ehrenberg at Seeking Alpha, “OTC Derivatives: Risks and Rewards,” which explains that the over the counter derivatives business poses a risk, perhaps a significant risk, to the Wall Street community. For the benefit of readers, over the counter derivatives are those that are not traded on an exchange. Recognize […]
Read more...This Financial Times article, which describes the growing role that asset-backed securities play in investment bank profits, comes as no surprise. Not only are these products significant in terms of total revenues, but they are more profitable than the norm for these firms. But connect the dots: Wall Street is one of the biggest funding […]
Read more...