September 2008
Interesting to see that so many companies with nothing to do with Wall Street, banking, or trading all got off their asses and began shouting at Congress today. Stories are everywhere about people like Microsoft's Steve Ballmer finally realizing that...
Good description in a recent CEPS report of how the U.S., via its AIG bailout, temporarily saved the over-leveraged European banking system. But the AIG case shows the importance of another link across financial markets, namely massive regulatory arbitrage. The...
I've long argued that part of the reason why things have gotten to this point is that we don't have enough smaller banking crises, so we just have the odd epochal one instead. It's much the same point as is...
Even more links that keep flooding into my inbox: Administration, Congress Completely Fail Communications Test (Advertising Age) Corporate bonds have worst month since 1980: "the only thing you know is that if you don't buy anymore, you can't get hurt...
A snapshot of exchange rate trends over the last 90-days among major currencies to the U.S. dollar. A bit of vindication underway for the Yen given the similarity of the credit crisis to Japan's experience more than a decade ago....
A few quick links to items of interest today: Blast from the past: Fannie Mae eases credit to aid mortgage lending (NY Times/1999) The World Is Curved: Hidden Dangers to the Global Economy (Amazon) Op-ed: Beijing slowdown is going faster...
So here's where we are at: Almost two weeks ago the market soared when late on a Thursday word broke that Congress would soon see a U.S. plan to help solidify the financial system. It continue to climb the next...
For a literate and interesting take on why taking a little more time to work out a bailout package isn't disastrous, read this Michael Lewitt column. An excerpt: The problem with trying to legislate in the middle of a revolution...
Here is a quick cut at geocoding Monday's House vote on the TARP plan. The following color-coded map of the U.S. shows each state's relative "Nay-isness" or "Yea-ishness", with pure white meaning the state's representatives voted all "Nay", while pure...
A scathing comment over on Nouriel Roubini's RGE Monitor blog that is sure to provoke some strong feelings: It's amazing how many people, including some on this blog, are totally misreading the situation. The House Republicans fear socialism, even this...
After today's debacle on the capital markets -- in a too-fine irony, the S&P 500 lost roughly the same amount in aggregate market capitalization today as the Paulson plan's gross cost -- I thought folks might enjoy an update on...
From today's WSJ, a motley coalition that showed up at the NYSE to protest the TARP bill's possible passage. [Copyright Shannon Stapleton/Reuters]...
Some useful analysis here from the Washington Post on why the bailout bill failed, despite being described by the President and both parties' leaders as critical and essential. I accept most of the arguments, ranging from bad salesmanship on outward,...
Words don't do it justice, so here you are, your moment of markets non-zen. I'm still amazed at the nitwits who thought they had an argument-stopper simply because the markets didn't fall 1,000 points when the House TARP vote was...
I keep getting emails saying, "See, the House voted down the TARP bill, and the world didn't end, so we must be right in saying it was unnecessary." Three points: The markets aren't convinced TARP is dead -- the U.S....
Voting in the U.S. House of Representatives is underway on the financial services bailout bill, and it is a very tight thing. This is going to be brutally close. Dow is tanking with it looking like a failed vote. Unbelievable....
The chart du jour comes from Google Trends, and it's the twelve month trend in searches for "FDIC" (the folks who insure U.S. banking deposits)....
I've been listing books lately that are about the credit crisis, albeit in indirect fashion, like the excellent Plight of the Fortune-tellers. Today's book is one that isn't really about the crisis at all, but turns out to be...
A few quick things to items others may find interesting (and not all credit-market related): Merger arb one of only two hedge fund strategies up on the year (HFR) Jim Grant interview at the FT (FT) Lehman's Demise Triggered Cash...
I know no-one cares about anything other than the synchronized collapse of global credit markets, but runner Haile Gebrselassie's weekend performance in the Berlin Marathon is worth a moment of celebration. In that flat and fast race, the Ethiopian distance...
The boots have been put to the decoupling hypothesis, with Europe now in full we've-got-bailouts-too panic, and Asian only slightly behind. People forget, but European banks are, on average, materially more levered than their U.S. counterparts, and, as a result,...
Full text is here of the Emergency Economic Stabilization Act. It is more than 40 pages long, and full of legalese, but it should be required reading. While I still believe we had no choice but to act, this is...
Nice chart from NYT with the current U.S. banking leader list, post WaMu/JPM:...
Here is a sneak peek at some links from my weekly Weekend Reading column over at TheStreet.com: A (biased but interesting) comparison of all the Paulson plan iterations (Roy Blunt (R.)) Black Swans and Market Timing: How Not To Generate...
You can't go very far without someone telling you how the credit crisis is being sprung on an unsuspecting electorate as some sort Bush Administration election surprise. I'm not sure how it helps McCain, but let's give that a pass...
Here is summary text of the bailout agreement, via Nancy Pelosi's office. Boasting about cutting the Paulson $350-billion is specious, as is crowing about the Democrats requiring reforms. I hate politics. REINVEST, REIMBURSE, REFORM IMPROVING THE FINANCIAL RESCUE LEGISLATION Significant...
According to reports late tonight, negotiators have (re-)reached a tentative deal on the bailout of the financial system. Full story here, but the gist as follows: $700-billion in total $350-billion immediately, with some of that earmarked for the insurance initiative...
My quote du jour is solipsistic again. Here's me from earlier today on Twitter: Carping at how Wall Street-ers will benefit from the proposed credit market bailout is like rodents in a sealed box arguing that poking new air holes...
Not sure if I've mentioned this book here before, and it's admittedly for the empirically minded, but the best book on the current crisis remains Riccardo Rebonato's excellent Plight of the Fortune-tellers. Great reading -- from before things melted down...
The other night on CNBC my friend Barry Ritholtz told a good story. He said that for the first time in credit market history loans between 2002 and 2006 were made on the basis of the ability to cut up...
When I was a child I had a fever. My hands felt just like two balloons. Now I got that feeling once again. I cant explain, you would not understand. This is not how I am. I have become...
The betting line on a financial markets bailout deal today is improving, and the market is responding accordingly. But John McCain is not coming out of this smelling of roses (nor, to some degree, is Obama, if only because he...
John Paulson of Paulson & Co. endorses Treasury action, but with preferred share and warrant coverage for we taxpayers. Agreed, of course, but I still think we end up with a mix of weapons: taking individual items off balance sheets,...
Because some men aren't looking for anything logical, like money. They can't be bought, bullied, reasoned or negotiated with. Some men just want to watch the world burn. -- Dark Knight (2008) Take your third deep breath in...
As much I'm happy to criticize the deranged U.S. for this ongoing credit market fiasco, the following quote from a German finance minister Peer Steinbrueck frankly pisses me off: He championed the German banking system over its U.S. counterpart, dismissing...
Some quick links to things other may found interesting: Michael Lewis says we need to save Goldman Sachs' bonuses to save the world (Bloomberg) Let's ease off hiring Goldman Sachs people for so many senior governmental positions (FT) Roubini conference...
Kilgore: Someday this war is gonna end. -- Apocalypse Now (1979) Marc "Gloom, Boom, & Doom" Faber wins the prize for big, hairy audacious market goal post-Paulson plan acceptance. He says we could see 1,350 on the S&P...
This only fills in the anecdote blanks for anyone paying attention, but there is a looooong new two-part Bloomberg series out castigating the credit rating agencies. It's worth reading, however, and you can think of it as a complement to...
From comments by Barney Frank tonight, a deal has been reached by House and Senate Democrats to create legislation to pass the U.S. Treasury financial market rescue plan. Here is the money quote (literally): There is conceptual agreement, including I...
If something cannot go on forever, it will stop. -- Herb Stein, from sometime in the 1980s The above remains one of my all-time favorite quotes about financial markets, and it feels more true and important today than...
Keaton: McManus. What the fuck is going on? McManus: The strangest thing... -- The Usual Suspects (1995) Here is a quick tag cloud of President's Bush's speech to the nation earlier tonight on the credit crisis. You'll notice,...
I'm speaking tomorrow at 12:30 at an event at the CFA Society of San Francisco. Come by and say hello if you're in the area. It should be fun. More information here....
Courtesy of Felix Salmon and some other sources, a list of all the known journalists and others in various stages of completion of books about the current crisis: Joe Nocera and Bethany McLean Andrew Ross Sorkin Roger Lowenstein Kate Kelly...
This interview with Warren Buffett on CNBC should be read in its entirely. An excerpt: What you have, Joe {Kernen], you have all the major institutions in the world trying to deleverage. And we want them to deleverage, but they're...
To be delivered with Jack Nicholson-style intonation, from A Few Good Men: "Son, we live in a world that has bonds and those bonds need to be bought by men with balance sheets. Who's gonna do it? You? You, Lieutenant...
Some interesting comments from Henry Paulson to Time magazine in a new interview just out. The last nugget, in particular, caught my eye: I believe we're going to get a bill that works and a clean bill ... It certainly...
The idea of a company being "too big to fail" is wrongheaded. And I don't mean that no company should therefore require a bailout/bridge/whatever. No, it's just that focusing on size as the main metric is wrong. What we really...
The latest Vanity Fair includes New York mayor and all-around wealthy guy Michael Bloomberg doing the Proust Questionnaire. What do you consider the most overrated virtue? Height. What is your greatest extravagance? Popcorn. What is your current state of mind?...
And we have another member of the "shut up about moral hazard" club. (See here and here.) Ex Fed guy Bob McTeer signed up today via this posting to the new Economix blog at the NYT. The key reason to...
Nice (and harrowing) graphic from a savvy Martin Wolf column in yesterday's FT....
Nice editorial in today's Times of London echoing my prior comment here that people need to shut up already about "moral hazard". Having learnt the term, people tend to get a great deal too excited about moral hazard, the idea...
Missed this until now, but Pimco's Bill Gross weighed in on the Paulson Plan in today's Washington Post via an OpEd. He argues (with me) that this is not a generic financial downturn that can be cured by bed rest,...
Let's say that last Tuesday you were looking for a safe port in the storm as markets imploded. Where would you most profitably have gone? Oil? Gold? Cash? Swiss Francs? How about Fannie Mae and Freddie Mac. As the following...
Regardless of your feelings about Larry Kudlow and/or Vermont Senator Bernie Sanders (D.), this is amusing viewing....
Stephen Schwarzman of Blackstone Group accidentally (I think) echoes a blackly comedic Michael Lewis column of almost a year ago in blaming the conniving poor for the current crisis: It’s a perfect storm. It started with Congress encouraging lending to...
After me demanding here for some time that President Bush stand up and defend himself and explain the current crisis, it now looks like it's going to happen. President Bush is considering whether to address Americans directly about the financial...
Dr. Strangelove: Of course, the whole point of a Doomsday Machine is lost, if you *keep* it a *secret*! Why didn't you tell the world, EH? Ambassador de Sadesky: It was to be announced at the Party Congress on...
My friend and colleague Bob Litan has out a thoughtful essay on fixing finance. Definitely worth a careful read. My biggest disagreement with Bob's paper concern's the role of credit ratings agencies. As I have told him, they are largely...
That's why I'm turning Japanese I think I'm turning Japanese I really think so -- "Turning Japanese", The Vapors A primary objection many people seem to have to the Paulson plan is the unwillingness of Paulson and Bernanke...
More discussion from the Charlie Rose show on the current crisis, this time with guests Alan Blinder and Steven Pearlstein:...
It's nice to have a lot of money, but you know, you don't want to keep it around forever. I prefer buying things. Otherwise, it's a little like saving sex for your old age.' -- Warren Buffett explaining...
Some people out there need to spend more time in remedial finance. There are two things going on in the financial sector, and while they are linked, they can and should be usefully separated, at least for discussion. We have...
I am in unsurprised dismay watching the Senate Banking Committee hearings this morning with Bernanke, Paulson, et al. Doug Kass gets it right in a comment moments ago: It reminds me of a bunch of school kids who turned...
No big surprise, perhaps, but the U.S. dollar has hit a wall with respect to most other major currencies. The inflection point can be nailed pretty much spot on, as the following figure shows: September 10, 2008. [via Pacific]...
Some quick links to things others may find interesting: At least two short-sellers (GLG and Och-Ziff) are on the no-short-selling list. Isn't that some sort of wormhole in the space-time-SEC continuum? (NYTimes) If i-banks cut leverage ratios from 30 times...
According to new data from TransUnion, U.S. auto loans 60-days past due rose 11.5 percent in the second quarter. Blame a slowing economy and seasonal trends, says TransUnion, but this quote struck me: "In some states there's a lack of...
Very nice new John Mauldin missive out (okay, done by a guest, but still good), so read it in its entirely. Here is a quote from the conclusion that should be required by knee-jerk equity buyers: ... what would you...
This won't come as a big surprise, but uber-investor Jim Rogers doesn't like the Paulson plan: "It's astonishing, devastating, and very harmful for America and American citizens," he tells me. "It means we're in for the worst recession since World...
Walter Sobchak: Were you listening to The Dude's story, Donny? The Dude: Walter... Donny: What? Walter Sobchak: Were you listening to The Dude's story? Donny: I was bowling. Walter Sobchak: So you have no frame of reference here, Donny....
Am I the only one who was surprised more wasn't made of the following quote from a WSJ article today? It concerns the speedy transition of Morgan Stanley and Goldman Sachs to bank holding structures. Morgan Stanley officials have been...
What is truly disgraceful is that investment banks could only manage returns on equity of 15-25% with a balance sheet that was often leveraged to the sky. -- Niels Jensen and Jan Wilhelmsen, of Absolute Return Partners [via...
First in what I'd like to hope will be a regular series: Scene: A midtown Manhattan bar, around 1am on September 15/ 2008. Guy walks in dressed like a banker -- blue shirt, grey pants, etc. Has a few quick...
Here is the quote of the day: To paraphrase Oscar Wilde, the idea that Goldman Sachs' rogue tendencies can be adequately restrained by banking regulations strikes me as the triumph of hope over experience. -- Me, on Twitter today...
Provocative comments from mega-quant Cliff Asness of AQR on the current crisis: Let’s step back. Wall Street’s greed and short sightedness, and the consumers’ real-estate bacchanalia, was certainly a big part of recent events, but the biggest drivers in creating...
I know it's all the rage to ooh and aah at the market's implosion right now, but a momentary diversion isn't so bad. The folks over at the excellent Science of Sports have put together this video retrospective of some...
This was supposed to be an Inc 500 discussion on Friday with John McCain and Barack Obama's economic advisors, but Obama's guy was a no-show (which is more than a little strange). Anyway, worth watching, as my friend and colleague...
Okay, I never thought I'd say this, but I agree with John McCain: SEC Chair Chris Cox should be fired. Who would have thought he would stoop so low as to use the front page of the SEC site to...
There is a small silver lining in all the carnage out there: lots of MBAs are going to have to rethink their career choices. Finance and investment banking have been top of the pops for some time, and that grew...
My friend Nouriel Roubini in the weekend FT talking about then next stage in the current crisis: The next stage will be a run on thousands of highly leveraged hedge funds. After a brief lock-up period, investors in such funds...
I'm torn about the news this morning on Goldman and Morgan flipping to a bank holding structure. It's overdue that the two companies are shrinking their leverage and rethinking their approach to risk, and I don't care about the end...
I see that the Financial Times has signed U2 singer Bono on to do some blogging, and to get things started he answer a question on Wall Street's current troubles: AB: And finally – how much money have you personally...
It alternately amusing and discouraging to look back at news stories from 2002/3 and see how studiedly ex-Fed chair Alan Greenspan dismissed the idea of a housing bubble in the U.S. He called it "quite unlikely", said that there...
Oliver Stone, the director of the movie Wall Street, was reminiscing with the Wall Street Journal this week. At the end of the discussion he divulged the following: “I have stocks. I don’t even know what the [fuck] they are...
A friend of mine pointed out in an email this morning that since all we taxpayers are party to a big transaction (i.e., bailing out the U.S. financial system), Treasury should send us all fine new Lucite-encased tombstones for the...
Like it or not, Time and Newsweek talk to a huge swath of the population. And both discovered the credit crisis this week -- but took strikingly different approaches. Time buried itself in populist rhetoric and awful accounting, while Newsweek...
Here is a sneak peek at some links from my weekly Weekend Reading column over at TheStreet.com. Fact sheet from Treasury with Saturday night revisions allowing foreign banks into program (Treasury) How author Ian Rankin managers his money (Telegraph) The...
I was scanning some Morgan Stanley bond data this morning, specifically its 6.625% issue maturing in 2018. Its recent behavior is instructive in thinking about what happened last week, how unusual it was in historical terms, and why models...
While no-one is likely to change their mind on this -- the vilification of short-sellers is more or less complete -- but let's keep working away at it. Here is some data on the role of short-sellers in Morgan Stanley's...
Here is the full text of the Paulson/Treasury plan as sent to congress late yesterday. It is deliberately vague, of course, which will makes its Congressional ride a roller-coaster. At least as importantly, the two key numbers: $700-billion and $3-trillion....
So you think the Dow had a great day today, the best in ages? The headlines agree with you, with banners everywhere trumpeting huge gains. But to one way of thinking they're wrong, at least when you get outside the...
I agree almost entirely with Roger here. While I applaud the idea of the U.S. becoming less ad hoc in its re-engineering of the borked U.S. financial system, we have gone too far in some screwy directions in the current...
Since policymakers are decrying Wall Street as newly being a casino -- haven't they been paying attention? it's been a casino for, oh ... a century or so -- I'm leaving, appropriately enough, for Las Vegas. I'll be speaking there...
From an email I was forwarded today, if you took this week off you missed much less than you think. Like almost nothing at all. **9-12-08 CLOSE** **9-19-08 AFT** S&P 1252 1251 DOW 11422 11391 2YR 2.21% 2.13% 10...
Here is the word cloud of Treasury Secretary Paulson's speech this morning, and it is followed by the cloud for President Bush's speech. Some interesting differences in emphasis. President Bush: [via Wordle]...
I'm on CNBC's Power Lunch today at 1pm EST. Not sure what we'll talk about, as it's a fairly quiet day out there....
A bizarre and (frankly) mischievous claim is making the rounds that perhaps terrorists are behind the wave of stock shorting that has caused so many financial stocks to be taken hors pistes. I'm somewhere on the other side of...
Quite a day on the markets now that there are no evildoers around. Check the market map, which shows that things have settled a little from early euphoria, and there is some selling in consumer staples names, plus in Microsoft...
After radio silence throughout most of this financial crisis, President Bush (you remember him, right?) spoke today -- and he did better than I expected. I thought he was direct, calm, and relatively on-message. I'll post a full transcript...
Great. Now Nick Leeson, who famously brought down a bank himself through the use of derivatives, is scolding us. I love, in particular, how he ties the credit crisis to being offered five credit cards after taking down Barings Bank....
I've been scanning the SEC's just-released rule banning shorting of financial stocks. According to the SEC, a staggering 779 stocks are covered by the order, which goes into effect immediately. The SIC codes covered are 6000, 6011, 6020-22, 6025, 6030,...
DUDE: Rug pee-ers did not do this. -- The Big Lebowski (1998) Prominent in the vast and ever-growing bestiary of people being blamed for the ongoing financial crisis are the credit rating agencies. It is their ongoing downgrades...
Speaking of Pakistan's self-imposed no-market-declines rule, all's well in the land that bad news forgot. Consider this quote from a securities dealer in Karachi concerning the current global crisis: "Global financial turmoil has not and cannot affect Pakistan, thanks to...
We have had a remarkable day today in New York and in markets around the world, and it has seemingly turned into an equally remarkable night. According to reports, senior Congressional representatives began meeting at 7pm tonight with Ben Bernanke...
In a predictable twist tonight, SEC Chair Chris Cox has said he is going to follow the U.K.'s FSA and institute a temporary ban on financial short-selling. If true, and if it weren't such a stupid idea, it might...
We're now into the blame game, and it seems obvious that a major chunk of the blame for the current mini-round of the ongoing financial crisis is being accorded to short-sellers. Tonight we are hearing about new disclosure rules...
A few people have asked about my compound annual Dow returns for U.S. presidents, so I whipped together a quick and dirty live table....
House Financial Services chair Barney Frank (D-MA) is pushing harder than anyone else for more financial market regulation, plus talking about a possible government vehicle. So, whether you like the man and his often nonsensical posturing or not, you sort...
The numbers are amusing in this ABC News piece, but the idea is right: The current financial crisis and the massive layoffs in the financial services industry are transforming Manhattan real estate. "Five years ago, if you were an investment...
While it has a somewhat extreme title, this segment from CNBC Europe with a UBS economist is fairly clear-minded and useful. The gist: Governments have the balance sheets to solve this problem, if they choose to do it....
While Yale won't announce its endowment performance results for a few months yet, a Yale paper has initial figures on it, and it looks a little weaker than expected. David Swensen has apparently managed to eek out single-digit returns, but...
Full text, such as it is, of President Bush's first real statement on the current crisis. The American people are concerned about the situation in our financial markets and our economy, and I share their concerns. I’ve canceled my travel...
Oh, now John McCain is suddenly swinging with both fists on capital markets? He just said he thinks SEc Chair Chris Cox should be fired because he allowed naked short-selling and that is driving the current crisis? Un-be-frickin-believable. First, it...
As of moments ago, we just blew through a Dow round-trip for the Bush Administration on the Dow. The Dow closed at 10,578 on January 22nd, 2001, and we are currently at 10,512, for a -0.6% decline overall, or -0.07%...
Good ten-year-old paper I hadn't seen before from Wharton evaluating the options for resolving problems in banks (and banking systems). Despite being a decade old, it has some solid reading as we work through the problems in the U.S. and...
I was recently re-reading Frank Partnoy's excellent 2003 book Infectious Greed (yes, we both borrowed our names from a 2002 Alan Greenspan speech). It remains remarkably prescient with respect to the current crisis, having nailed the origins, the motivations, and...
Funny Jon Stewart segment on the recent financial bailouts. I especially like his "The CNBC octabox!" comment. Cute. Somewhat more seriously, this issue continues to spin out of control and needs to be explained to people. Right now. Because the...
To be somewhat less serious than I have been of late here, here is some lovely eye-candy of the venture capital business in the U.S. Check out the following two cartograms from the current issue of Nature (and click for...
I missed this until now, but a Paul Volcker, et al., editorial in today's Wall Street Journal is required reading. The authors essentially argue for a new Resolution Trust Corporation, a government vehicle that can buy up toxic paper on...
Check the following spycam video of Fed Chair Ben Bernanke and Treasury Secretary Hank Paulson in disguise in a car. Market-moving moment is 2 minutes in....
It's predictable. Every time there is a financial crisis Warren Buffett's name gets pulled out like he's going to start buying things and save the day. This time around it's been no different, with his naming coming up during...
In a speech tonight at Georgetown University, New York Mayor Michael Bloomberg -- a savvy financial guy -- had a few things to say about the current crisis. Here is one that caught my eye: It's not clear who's going...
Great quote tonight on CNBC from Dennis Gartman on the AIG non-bailout: ... I’m amused that everyone is calling it a bailout. I’m sorry but AIG is borrowing money at close to 12%. You can borrow money from Nick the...
I'm not the only one noticing President Bush's wrong-headed reluctance to say anything with respect to the current market meltdown. Check this Dow Jones story. On Tuesday [when AIG news broke], Bush dismissed a reporter's shouted question on AIG. In...
Merger arbitrage funds are seemingly balking at the Bank of America agreement to buy Merrill Lynch. As a result, the difference between the MER share price and the BAC offer is stuck up around 18%, which is very high. Why...
Anyone want to hazard a guess -- assuming we still have credit rating companies after the apocalypse -- whether the credit league table of Aaa-rated sovereign nations (according to Moody's) will look the same in 12-24 months? Here they are:...
I've written before here on watching Ebay markets in failing companies, so this is in that vein, albeit from a political point of view. Here is a graph from Terapeak comparing trends in how McCain-related and Obama-related goods are doing...
With news today that credit default swaps on U.S. government debt have risen to a record level -- essentially meaning that there is growing nervousness about U.S. creditworthiness -- it's time to take a closer look. After all, many are...
Some quick links to things others may find interesting: Bill Gross's Total Return Fund has a done a roundtrip: Made 1.3% on FRE/FNM trade, and lost 1.4% on AIG trade (Bloomberg) Russian market crisis mounts, with markets closed for second...
Many people are irritated that the U.S. is being forced to go alone in bailing out so many broken global financial companies as the shadow banking system falls apart. I'm here to tell you they're wrong. Check the following: Germany's...
Slate has launched a new financial news/analysis site, called The Big Money. It seems fine, has the requisite Slate contrarianism and the design is nice, but I don't immediately see anything there that makes me think I would go back...
Another great installment from the Charlie Rose show, this time with ex-AIG chair Maurice Greenberg. It was done early last night before the AIG bridge deal was announced, but it's still highly worth watching....
"We must walk without rhythm." -- Paul Atreides (from Dune (1975)) People are falling out of trees saying that with AIG the Paulson team at Treasury have crossed a line. First we weren't going to assist, then we...
Sooner rather than later, Treasury and the Fed need an in-house private equity manager. Why? Because it now owns a new, large and growing portfolio of semi-public companies, including Freddie, Fannie, and AIG. And it not only has massive stakes...
Some interesting papers on housing and capital markets were presented at a Brookings seminar last week. The Hatzius, Case, and Caballero et al., papers are all particularly good. Goldman Sachs' Hatzius argues we could lose 1.80 percentage points of GDP...
AIG released a somewhat disordered and incoherent statement late tonight about its just-received Fed bridge/bailout: The AIG Board has approved this transaction based on its determination that this is the best alternative for all of AIG's constituencies, including policyholders, customers,...
In the wake of recent events, this AIG commercial -- market risk? liabilities as nightmare? the strength to be there? -- comes across as considerably more blackly comedic than likely intended. On the other hand, we could hire the kid...
The Federal Reserve held a conference call for reporters tonight, and here (via Dow Jones) are some bullet points on the AIG bridge/bailout: The market was viewed as better able to handle a Lehman bankruptcy than an AIG one. The...
With so many economists explaining so knowingly in recent days how we got into our current predicament, I keep having a quote from Michael Milken going through my head. You get full points for telling me things before they happen,...
Some quick links (not all of them AIG related) that others may find interesting: Inside the Paulson Doctrine: Who wins, who loses, and why more disclosure is needed (Roger Ehrenberg) Let's start by finding some people to blame (Michael Lewis/Bloomberg)...
The Treasury announcement with respect to using the Fed and Section 13(3) of the Federal Reserve Act to bridge insurer AIG is out. Here is the release: Release Date: September 16, 2008 For release at 9:00 p.m. EDT The Federal...
I wish people would shut up about "moral hazard". Yes, bridging AIG through its current crisis is not something you want to do; and yes, it would be better if the market solved its own problem. But even a cursory...
Take your second deep breath of the week. We are at a cusp tonight, with a Treasury deal allegedly on the table to provide a $80b bridge loan to doombound insurance company AIG. The deal would apparently include warrants to...
Charlie Rose continues to do, far and away, the most thoughtful and lucid work on the ongoing financial crisis. The following conversation from last night's show is another good example. It includes my friend Nouriel Roubini, who came straight over...
As I alluded to last night, I'm out for most of the day today. My early impression of today's opening is that it's about as expected: Markets think this is bad, but not horrible, and they are trading sharply but...
Given today's news, expect a major round of the good old "Blame the short-sellers" game to commence. Louise Story's one-sided piece in today's NY Times is a good example of something we are likely to see more of as financial...
Well that's it then. Lehman has now filed for bankruptcy, or at least its holding company has. As one European Bank official said somewhat plaintively to the Wall Street Journal as he looked to tomorrow's trading, "We are in the...
In case anyone's curious, it's been a hotbed of activity over at the Lehman page on Wikipedia. While we haven't seen a repeat of last week's attempted malfeasance, we have seen 36 edits to the page today (Monday), and we...
In thinking about the massive layoffs set to ripple through U.S. financial markets, not to mention the layoffs we've already seen, I went back and checked the latest securities industry employment data. Here it is, monthly back to 2000, followed...
Alan Greenspan was on ABC This Week earlier today. All unintended puns (and there were many) and buck-passing (and there was even more) aside, it is worth watching. He is a crummy prognosticator, as history shows, but a savvy analyst...
I have had more than a few people ask me via email why BofA is buying Merrill. After all, Merrill is badly broken, and BofA could almost certainly pick up whatever pieces are worth picking up for even less in...
I don't totally agree with the sentiment here, but I love the evocative imagery with respect to what's been happening in financial markets in recent days: The raptors test the fence for weak spots. The speculators think the authorities...
Take a very deep breath. It looks almost certain that this week will be the one where we see the financial implosion in U.S. banking and brokerage that many have been expecting for some time. It reminds me a little...
Steve McCroskey: Looks like I picked the wrong week to quit sniffing glue. -- Airplane (1980) According to news today, here is what we have to look forward to on Monday: Lehman Brothers may seek Chapter 11 protection...
One of my favorite writers is gone. The polymathic David Foster Wallace was found dead Friday night in his Claremont, California, home by his wife. The cause of death was apparently suicide, and Wallace had struggled with depression in the...
From Charlie Rose last night, here are Robert Rubin and Larry Summers talking the current financial crisis. Definitely worth watching. As an aside, why is it that Charlie Rose is one of the few in mainstream media taking this story...
Oodles of good stuff at The Oil Drum on Hurricane Ike's impact on oil and gas infrastructure as it makes landfall near Galveston TX. Definitely check it out....
ABC's "This Week with George Stephanopoulos" show will have Alan Greenspan this Sunday morning. Here is the blurb: Then, in another EXCLUSIVE interview, former Federal Reserve Chairman Alan Greenspan shares his thoughts on the state of the U.S. economy and...
To indulge my sports science geekishness for a moment, there is some great analysis out from my friends at The Science of Sport of yesterday's claim that Usain Bolt could have run a 9.55s 100m in Beijing if he had...
The party line inside the Bush Administration about the current financial crisis seems to be that it's not as bad as the S&L Crisis was. Check the following transcript of a press conference this morning with his economic policy minions:...
Some quick links to things others may find interesting: Michael Lewis on Lehman: A good example of people finally learning not to buy what i-bankers are selling (Bloomberg) Global equity trading falls 37% so far this year, and 78% (!!)...
I have had to explain the following to myriad people in recent days, so I might as well put it here. Q: If we can bail out Bear Stearns/Lehman/Fannie/Freddie/whatever, there is no way we can say no to bailing out...
A few quick links to some things elsewhere of interest: Volume and price patterns around a stock's 52-week high (SSRN) Less than 62% of the $6.88-trillion on deposit at U.S. banks is insured (Bankrate) Economist Ken Rogoff: Current crisis is...
Everyone loves to prattle endlessly about how much higher personal savings is in China compared to the U.S. The U.S. rate has, until recently, saved a shrinking percentage of income, because of, among other things, the ease with which consumers...
Given someone's mischievous attempt today to anonymously insert Lehman Brothers bankruptcy news into that troubled company's Wikipedia entry, I thought it would be fun/interesting to have a closer look at that page's recent edit history. So, here is a graph...
A reader just pointed out to me that mischievous sorts are messing with Wikipedia by inserting supposed "facts" in the entry there about troubled investment bank Lehman Brothers. Here is the insert, which was removed a scant few minutes later...
Yves over at Naked Capitalism is saying that she has two sources telling her that Lehman is at its end, with Goldman set to buy the firm. The stock is certainly trading today like a take-under is coming, down sharply...
Lots of people still suggesting sovereign wealth funds as the eventual saviors of the U.S. financials. While that is, of course, possible, it's worth having a gander back at how their last attempt at picking a bottom in the sector...
9/11 in photos, then and now, via the Boston Globe. My own unplanned remembrance this morning just stretched out much longer courtesy of these alternately inspiring and heartbreaking pictures....
Some wise-ass comments just write themselves: Employees of the federal agency in charge of collecting royalties from oil and gas companies accepted gifts from industry representatives, engaged in "sexual relationships with industry contacts" and engaged in "alcohol abuse" while socializing...
From my inbox, the subprime spam du jour: FAITH-BASED EARLY WARNING SYSTEM FOR INVESTORS: “PROPHETIC” RELIGIOUS GROUPS SOUNDED SUBPRIME LOAN ALARM 15 YEARS AGO Gosh, it turns out there were two faith-based early warning systems in debt markets. The credit...
The more I listen to the non-business media, the more I think the President needs to get on TV and explain what's happening in financial markets. It would be nice if he took some responsibility too, but I'll settle for...
Interesting that all of a sudden chatter has moved from Sovereign Wealth Funds buying broken U.S. financials, over to Canadian banks doing same. This strikes me as more casting about for plausible balance sheets, but it's not impossible. More seriously,...
I just realized ... wasn't the first test of the Large Hadron Collider around the same time as the Lehman announcement this morning? Dick Fuld is a brave man....
From the oil speculators are evil file, a new report makes all kinds of loop suggestions about how to save us all from commodities markets: Washington lawmakers and a money manager, stepping up an attack on commodities investors, will unveil...
Hard not to think the unthinkable in the wake of recent events. Specifically, what is the likelihood of the U.S. defaulting on its debt? Admittedly, it would never be because of this one episode -- it would be that, plus...
My friend Nouriel Roubini (and some others) were on Charlie Rose last night talking Fannie/Freddie. Worth watching....
You break it, you bought it. That's the Pottery Barn rule, at least as channeled by ex-Secretary of State Colin Powell. Apparently Peter Orzag at the Congressional Budget Office lives by an accounting variant of the same thing: Given the...
Bleak piece in today's Sun wherein the writer found two people in U.K. named "Freddie Mac" and "Fannie Mae". Black comedy ensues: FREDDIE Mackie — known as Freddie Mac — lives with his wife Carol in a two-bed terraced house...
Bill Gross's Pimco may not have just delivered the best one-day gain ever on a trade, but his $1.7-billion gain on Monday was arguably among the best from a risk-return standpoint. He locked himself into the agency mortgage bond market...
Some more tidbits from the new Coldwell Banker release: Dubai is the most expensive market studied outside of North America, where an HPCI subject home averages $2.45 million U.S. dollars, 33 percent higher than La Jolla. Quito, Ecuador, ($96,000) is...
There is a massive arb opportunity out there in playing off La Jolla, CA, and Sioux City, IA, real estate prices. If you just buy real estate in Sioux City, and sell it in La Jolla, you could ... now...
A bright spot in my day today was this adventure with UAL wherein it was briefly (and incorrectly) declared dead, only to discover it's not dead yet. The feel-good story of the .... day! More here....
A question I keep being asked today: So, this is complex stuff, what does it all mean for the average consumer? The orthodox thing to do is mutter something about lower rates, making it easier to get loans, etc. The...
I spoke this morning at a SABEW event, a society for business journalists. Lots of subjects discussed, including Freddie/Fannie, journalistic bias, Ben Stein's cluelessness (okay, we didn't get to that one), etc. In prepping for the talk, however, I was...
Am buried in meetings and some, ahem, understandable market-related stuff today, so posting may be light, at least until later. My friend Barry over at the Big Picture is posting up a storm, and John at Bronte Capital has some...
Expect a few more of these before it's over, but the WSJ has out a decent timeline of how the Freddie/Fannie bailout came together. There are some useful details, so check it out. My main question: Considering the number of...
Why didn't the Freddie/Fannie bailout deal wipe out the common shares? That's one question most people have, myself included, as we look at the structure of the deal. Leaving common shareholders with 20% of the equity of the firms seems...
I'll try to do these more often, but here is a quick list of some financial (and other) research papers that I've come across this week: Who gambles in the stock market? Socioeconomic factors that favor buying lottery tickets --...
Here is a sneak peek at some (non-Fannie/Freddie) links from my weekly column over at TheStreet. More allegations about nefarious activity in oil markets (Risk) Black Swans and Market Timing: How Not To Generate Alpha (Journal of Investing) Michael Lewis...
Details on the just-announced Fannie/Freddie bailout plans were initially scant, but the OFHEO and Treasury websites now have most of what you're looking for. Here is the gist: The two mortgage giants will open Monday under Treasury control New CEOs...
Now they're planning the crime of the century Well what will it be? Read all about their schemes and adventuring Its well worth a fee -- "Crime of the Century", Supertramp (1974) What continues to amaze me is...
After a cold streak in early August where it missed closing banks two Fridays in a row, the Federal Deposit Insurance Corporation is en fuego. It has closed U.S. banks three of the last three Friday nights, including tonight's...
Hi, Tom Vanderwell here with another of my Mortgage Market Week in Review guest posts. Thanks to Paul for giving me the privilege of putting it here.....Well, it's Friday again, everyone is back in school, my 18 year old...
Is the Freddie/Fannie bailout plan being underplayed? News late today that Treasury plans are likely to be announced imminently strikes many people, myself included, as one of the biggest financial events in modern memory, and yet it feels underplayed. Why...
Word all over after the market close is that Treasury is finalizing its Fannie/Freddie bailout/backstop plans. The plans allegedly include changing senior management -- you think? maybe? gosh -- as well as putting taxpayers on the hook for a few...
Some quick things that caught my eye today: More anger unleashed over Bill Gross and Pimco (Big Picture) Paul Volcker says U.S. financial system is badly broken (Bloomberg) The first (and only) hurricane to hit southern California in modern history...
This morning off the top of The Call on CNBC I was chatting about jobs and the economy with Larry Kudlow and Robert Reich. It was, as you might expect, highly amusing, with noisy positions taken all around, and little...
A few quick things to empty out my brain: A mind-blowing SocGen report is making the rounds that says an "economy and equity market meltdown imminent". While SocGen's strat team are always apocalyptic, this one is particularly spooky -- and...
Am I the only one irritated by the fawning treatment given Pimco's Bill Gross and his commentary today? His implicit threat of a bond buyer's strike -- he wants the Fed to get off its ass and backstop Freddie/Fannie --...
When wildfires burn a landscape, it's not all bad. It cleans out underbrush, helping the next generation of plants and trees emerge. Wildfire is also required by some plants to propagate, like various species of chaparral, whose seed pods only...
I keep coming back to a comment from Mark Cuban in the weekend Washington Post. When asked, among a host of others, what book he would recommend to people trying to make sense of the current financial/economic turmoil, amidst a...
I said, pressure drop Oh pressure, oh yeah Pressures gonna drop on you -- "Pressure Drop", Toots & the Maytals (1969) Not to get all weather-y again, but I was fairly gobsmacked by some data out of Hurricane...
I've been out and running around most of the day, which has meant no posts here. Here are a few quick links to interesting things by way of partial recompense: Stiglitz: With no manufacturing and no new ideas, what's our...
Quote of the day goes to this piece in Bloomberg on how Iraq bonds are outperforming those of Ohio banks. It is, in some surreal sense, the ultimate uncorrelated investment -- which means it belongs in your portfolio, of course:...
Some quick links to things others may find interesting: Michael Wolff gets to promote his new Rupert Murdoch book (Vanity Fair) Great new issue of Chance (on probability) is out (Chance) Carlos Kleiber, the world’s best conductor (circa 1990), only...
So, was Gustav a near miss -- an almost-Katrina -- or was it just another example of why weather forecasting remains up there with Kirlian auras as a scientific pursuit? Some good analysis follows of the nearness of the Gustav...
I have a host of speaking events coming up -- including following T. Boone Pickens at one event, which can only go badly -- but one that I have been meaning to mention is a panel for the CFA Society...
Debate topic: My buddy Marc Andreessen is finally right, Google's new Chrome browser -- which has been coming for roughly as long as .... oh, let's say Guns 'n' Roses Chinese Democracy -- is finally reducing Windows to a poorly...
When investors talk about the weather, should anyone listen? That is the question on many people's minds today after Gustav tracked further west than most hurricane forecasters thought it would, weakened materially before landfall, and generally didn't live up to...
