October 2008
Good Robert Skidelsky piece in today's Financial Times exploring the rapid changes in Russia's fortunes and outlook: The official view is that Russia is an outstandingly successful economy temporarily derailed by a financial shock of foreign origin. Its annual economic...
Some quick links to some items of interest: Tough economic times are ahead, and they’re priced in (NTRS) The coming deflation scare (Morgan Stanley) States face two years of falling tax revenues (Bloomberg) Distance isn’t quite dead: Recent trends in...
Provocative piece up earlier this week over on the (excellent) FT economists’ forum. Authored by Anders Aslund of the Peterson Institute, the piece takes people to task for stubbornly insisting that the current crisis could not end up being worse...
If the markets closed right now -- with the Dow, S&P 500 and Nasdaq up 12.2%, 11.6% and 11.9% for the week –- the Dow would have nailed down the #7 spot all-time for weekly gains. And the higher spots?...
When the National Bureau of Economic Research gets around the giving a start date to the current recession, what do you think that start date will be? You need to come up with a month and year. I’ll try to...
[Porsche] is an investment bank with a car showroom attached. -- Analyst quoted in Times of London And I’m sure that will end well....
Economists and pundits are spinning their heads in circles, going from inflation worries a few months ago, to deflation worries today, but still fretting about inflation in the future. It’s highly amusing to watch, and points to the perils of...
Great presentation by Juan Enriquez at Pop!Tech on the current financial crisis, its causes, and the solutions, such as they are. Juan Enriquez (2008) Pop!Tech Pop!Cast from PopTech on Vimeo....
Sorry for things being so slow around here. I’ve been traveling all week, doing talks and panels in New York and Toronto....
The future belongs to crowds. -- Don DeLillo, Mao II I’m spending a lot of time thinking about crowds and crowd turbulence, of late. In a presentation today, I used the the following photo from a paper on...
Nice Bloomberg chart of how market liquidity has trended over recent years, with things currently remaining highly restrictive in historical terms: More here....
I have been remiss in doing this for a bit, so here are some links to papers/abstracts that recently caught my eye: Didier Sornette on how to repair trust in a complex system post-crisis (Source) Analytical and Numerical Investigation of...
Some quick links to items of interest: TV seeing political ad spending 40% below some forecasts, despite record fund-raising (Bloomberg) Profile of Bill Fleckenstein and fellow short-sellers (Bloomberg) Predator-Prey Model for Stock Market Fluctuations (arXiv) Financial leverage – lights on...
I have a new column up on the “whys†and “how longs†of the dollar’s recent moonshot. More here....
Since my friend Joe Nocera first wrote about it last weekend in the NY Times, I have seen a spate of other articles all saying that bank executives are bad people for taking money from the U.S. Treasury and not...
I’m a big fan of Jared Diamond, in particular his books Collapse and Guns, Germs, and Steel. both of which are laudable efforts to take on massive and highly complex subjects, albeit at opposite ends of societal evolution. Anyway, I...
The Peterson Institute has brought back the “misery indexâ€, a combination of the inflation rate and the level of unemployment, and added to it a measure of asset price declines. The upshot? The modified misery index is now at record...
Michael Milken (yes, that Michael Milken) was on Charlie Rose last night. While his fellow guest, Mohammad Yunus, is a fascinating guy doing great work in microfinance, at some point I would still like to have Milken alone for the...
We have temporarily dodged a bullet. The upcoming IEA World Energy Report will say that global oil supplies are falling faster than expected, and massive investments are required just to (almost) stand still. The only thing making things marginally less...
I continue watching company news releases for air pockets, companies that aren’t just seeing revenues go lower on a glide path, but are seeing a complete disappearance of their core business. Today’s example: Wolfson. Wolfson Microelectronics (Edinburgh, Scotland) has again...
Some quick links to items of interest: Survivorship bias in capital markets: Why your market isn’t what you think it is (HSotM) Europe most exposed to emerging market debt – more than twice as big as subprime (Morgan Stanley) Volatility...
Eye-opening airline industry factoid from Foreign Policy: More airlines around the world have gone belly up this year than in the aftermath of September 11....
Useful chart from Crestmont of S&P 500 earnings-per-share over time, and how that has oscillated around a historical trendline tied to GDP growth. It provides support for my view that mean reversion plus an overshoot could easily get us to...
I'm out and traveling most of the day today. Posting will be somewhere between light and nonexistent....
Economist -– and recent Nobel-winner -– Paul Krugman was on Charlie Rose last week. Worth watching....
Apparently I'm not the only one noticing the fall-off in SoCal freeway traffic – despite lower gas prices: [via SOSD]...
The most useful research paper you'll read today (or maybe this year) isn't new, but it's still very timely. The paper, "Forecasting the Depression: Harvard vs. Yale", cited in the weekend NY Time by Greg Mankiw, drives home how we...
Jeremy Grantham at GMO has out Part II of his "Reaping the Whirlwind" two-part series on the credit crisis' aftermath(s). Among other things, he argues that there are benefits to the crisis, including increasing personal savings, an end to...
Here is a sneak peek at some links from my weekly Weekend Reading column over at TheStreet. Despite it being a far from sure bet historically, investors continue to move to physical gold (WashingtonPost) Donald MacKenzie revisits his great "Why...
Spectator I: I think it was "Blessed are the cheesemakers". Mrs. Gregory: Aha, what's so special about the cheesemakers? Gregory: Well, obviously it's not meant to be taken literally; it refers to any manufacturers of dairy products. --...
Cute graphic from the NY Post:...
From last week's ABS East conference in Miami comes this session title on the moribund asset-backed securities (ABS) market: Considerations for New Issuers in an Illiquid Market I'm guessing that session included sub-topics such as "ouch", "don't bother", and "where...
Some quick links to items of interest: France is showing new statist, anti-U.S. view in finance (Bloomberg) 30-year treasury yields at lowest levels in 30 years (Bloomberg) News Guns 'n' Roses "Chinese Democracy" CD book-ends credit bubble & collapse: Last...
No idea how I missed this, but there was a wonderfully tongue-in-cheek piece on business/finance books and the stock market from the Journal of Behavioral Finance. Here is a chart that drives it all home: Source: Exuberant Irrationality: Judging Financial...
Okay, this is really off-color, but …. the trouble with sending threatening letters containing white powder to financial services executives is that the letters will likely be fought over. Mine! No, that's mine! More here....
I'm a big fan of drive-by economic indicators, the sort of data that people disclose by their actions, as opposed to via surveys and the like on which they often lie. A case in point: Highway traffic in California. You...
How surreal is it in San Diego real estate right now? The city just broke ground on a footbridge downtown across a busy road and joining one luxury hotel to another luxury hotel plus the Petco Park baseball stadium. Trouble...
Remarkable to me how many people are newly discovering that either accidentally or on purpose they are newly foreign exchange traders. This quote from a WSJ piece earlier in the week drove that point home: Hungary is at the center...
I had someone email me a variant on this thought this morning, so I thought I'd share it here. Market participants aren't to be trusted at times like this because they're watching their world come down around them, and it...
With Dow futures having hit circuit-breakers on declines early this morning, it's worth reminding yourself what the current limits are: Level 1 Halt A 1,100-point drop in the DJIA before 2 p.m. will halt trading for one hour; for 30...
Two keeper book covers from the deranged stock market past. Both increasingly look like their authors slipped a decimal point....
There was an interesting panel today in New York featuring Paul Volcker, Joe Stiglitz, and Robert Mundell. It's lengthy, but worth watching. Kudos to Barry for the find. click for video Teresa Tritch, a member of the board of editors...
John over at Bronte Capital found this gem of a Newspeak-ish disclosure in a filing from troubled mortgage insurer MGIC: In accordance with industry practice, loans approved by Government Sponsored Enterprise and other automated underwriting systems under “doc waiver†programs...
I did another column this week for Tina Brown's new site. This one's on the fall of Alan Greenspan, and you can find it here....
Using some new data today from Fitch Ratings, here is the concentrations of high-yield debt by sector in the U.S. The chart compares the current situation with the onset of prior recessionary periods beginning in 2000 and 1989. High-side anomalies...
Interesting new Minneapolis Federal Reserve paper out attempting to puncture some supposed myths about the current financial crisis. I take its points, but I also think it's being a little mischievous. Definitely worth reading though. The financial press and policymakers...
The people at Bespoke Premium have out an interesting chart today showing the collapse of what they call the "globalization bubble". In essence, the chart shows the rapid growth, and subsequent collapse of Baltic Dry Index, a measure of international...
Today's House Oversight hearing into the credit crisis with witnesses Alan Greenspan, Chris Cox, and John Snow is grim and awful political theater. While not unexpected, it is by the most politicized hearing we have had too date, with...
I promised to update people on a trojan that some people said their antivirus programs had alerted them to on my site. It was allegedly contained in an International Monetary Fund image. On being alerted to it, I took the...
I feel like Butch Cassidy and the Sundance Kid. Who are these guys that just keep coming? -- Treasury Secretary Henry Paulson Jr. A great quote from a great movie opens a tough-minded NY Times piece tonight about...
The following more or less supports what some have been saying for a while -– that major banks in the U.S. and the U.K. will end up being entirely nationalized before this crisis is over –- but it's still a...
Compare the recent performance of four currencies now going through economic crises. Argentina is nationalizing its pension system to bail itself out of debt obligations; Hungary has had foreign lending dry up and force it to yank rates to double-digits;...
There is a great/harrowing audio track available from a PBS discussion last night with Benoit Mandelbrot and Nassim Taleb. The topics include wildness, hedge fund deleveraging, turbulence, bank insolvency, slack, global economic network effects, and why both Taleb and Mandelbrot...
The S&P 500 has predicted nine of the last five recessions, but now that we're undeniably in one, it's worth reminding yourself of the relationship between S&P 500 index moves and the economy itself. The relationship is generally leading, with...
I wrote a guest column this week over at Tina Brown's new The Daily Beast on whether fiscal stimulus is a good idea. Along the way, I noodled numbers about how much stimulus you'd need in the U.S. to make...
If you recall, some time ago I agreed to a just-for-entertainment bet with Arik Hesseldahl at BusinessWeek about Apple's Q4 2008. If the company missed its quarter or guided down, I won, and if it did neither, he won. The...
Folks, an update on the trojan alert I posted here a short while ago. A few people had emailed me that their antivirus apps flagged an International Monetary Fund graphic I had reposted here as possibly contained an image trojan....
It never rains, but it pours. I have had a few people email me saying an International Monetary Fund image in this post was causing their security scanners to warn of a possible Win32 image trojan. I have left the...
My book recommendation du jour is Niall Ferguson's overlooked The Cash Nexus. It is a prodigiously researched and and authoritative look at the relationship between money and power from 1700-2000. Ferguson's book should be required reading for anyone trying...
Some back-door data on the California real estate market via rebuilding statistics from the 2007 wildfires in southern California. A year later, only 150 homes out of the 1,646 burned -– roughly 9% -– have been rebuilt. While it looks...
This came up, indirectly, while I was on CNBC this morning, so here is a table of the top 30 countries worldwide as measured by external debt leverage. In other words, I'm looking at the ratio of total public and...
Nice comments from a pissed Fortis investor excerpted in an internal Moody's email in 2007:...
The actual soon-to-be-infamous "cows" IM exchange from credit rating agency S&P:...
Some useful data from Nielsen about recession-proof and recession-vulnerable consumer categories. Driving that point home, the largest U.S. past maker (I think) is American Italian Pasta Company (OTC:AITP), which is up a spiffy 104% this year. Granted, it's smallish-cap ad...
Riveting brinksmanship going on at 11th hour as Fortress Investment Group works frantically to refinance $1.7-billion in Intrawest debt, which expires tomorrow. Recall that Intrawest, the owner of the Whistler ski resort -- which will host the 2010 Winter...
Nice visualization (via Finviz) of global declines today:...
Some quick links: Barney Frank calling for moratorium on Wall Street bonuses (Bloomberg) CDO cuts show $1-trillion in corporate debt newly toxic (Bloomberg) OPEC risks split on cuts as member-countries reel (Bloomberg) Glory days fade for U.S. farmers (WSJ) Pakistan...
Another excerpt from the credit rating testimony today, this one from a former senior S&P official: This inevitably begs the question: why didn’t management see the need to keep [its ratings] model current [with respect to CDOs/subprime/etc.]? The answer is...
Some quick excerpts from documents obtained by the House Oversight Committee and presented today: In one document, an S&P employee in the structured finance division writes: “It could be structured by cows and we would rate it.” In another,...
U.S. Treasury Secretary Henry Paulson was on Charlie Rose tonight....
Wal-mart is like the Bureau of Economic Analyst of retail: It has all the data you wish you had about what's going on in the economy, plus more -- and it has it all in realtime. With that in mind,...
A tag cloud of the most common words spoken on CNBC today. [Created with Wordle]...
A quick reminder that we have two days of must-see credit crisis TV coming up on C-Span: Credit Rating Agencies and the Financial Crisis Committee on Oversight and Government Reform Wednesday, October 22, 2008, 10:00 AM at 2154 Rayburn House...
The OECD has out a new report on widening income gaps worldwide. The general view is that this will continue to widen as the economy weakens, but what will it look like on the other side of the current weakness?...
Sheila Blair at U.S. deposit insurer FDIC was a guest late last week on Charlie Rose:...
Some quick links to items of interest: 25 years ago: A farewell to the meter (arXiv) Top ten financial services advertisers in September 2008 (MarketingCharts) What's valuable now that we have no money? (McTeer) Zimbabwe needs some saving (Bloomberg)...
There is no stopping the CDS crackup chatter. While credit default swaps could do with a great deal more transparency, one data point we all need to deal with is the non-world-ending consequences of the Lehman bankruptcy. Today is...
Some unsurprisingly dire comments from Marc "Gloom, Boom and Doom" Faber on CNBC just now: On Asian demand bailing the U.S. out ... ASIA IS THE PRODUCER FOR THE UNITED STATES, AND IT IS ALSO THE REGION THAT HAS VERY...
John Mauldin has a useful slide of the cuts to analyst S&P 500 forecasts for 2009. They're coming down faster than in any six month period I've seen, and there are more cuts coming:...
I'm on Squawk Box tomorrow (Tuesday) morning talking Q3 earnings. One focus will be Apple, which I'm expecting to do decently in the quarter that just finished, but, if it's being forthcoming, to give unhappy guidance going forward. Granted, analysts...
Tonight I was trying to get a sense of what signals were missed earlier this year, so I got to reading comments from various well-known buy-side sorts. Here is a sample from March of 2008: Economic growth may remain fairly...
Caught myself meandering through the 1932 League of Nations World Yearbook tonight. Check the following figure to get a sense of the collapse in global trade during the early years of the Great Depression: Staggering stuff, especially considered in historical...
Some data sure to win you bar bets in this chart of first-half 2008 housing price declines. Who, for example, would have guessed that the U.S. was mid-pack, with Canada, among others seeing larger annualized tumbles in 2008? IMAGE REMOVED...
Markets pounded higher today as investors declared the credit crisis over, and as bears decided more or less en masse this was a buyable low, whether tradable or longer-term. They have proved themselves right, as there is no arguing with...
Now and then I like to post an update on the mad post-bailout machinations in currency markets, so here is a quick look. It is still a tale of pain against the U.S. dollar for everything but the Japanese yen,...
This is my favorite email bounce-back of the day. It came from a well-known U.S. economist: Due to the national economic crisis, neither my assistant nor I can respond to all the inquiries I receive. We will do our best...
Let's count some market bears recently turned bullish. Granted, not all the bears are of the perma- variant, and their bullishness is considerably more nuanced than the fevered pom-pom shaking you hear from the perma-bull side. Nevertheless, here are a...
I deduct 1 from my score for GMO's Jeremy Grantham new Q3 column for gratuitously mixed metaphors in its title -- "Reaping the Whirlwind" -- but it is still typically incisive and thought-provoking, so let's give it at an 7.5/10...
Speaking of China, here is my favorite little-known China factoid: Despite being roughly the same distance from east-to-west as the U.S. -- about 5,000 km -- all of China shares the same timezone. There is something winningly Mao-ist about the...
I'll confess to being something of a (short-term only) sino-bear, so this piece from the Far Eastern Economic Review a few weeks ago on China's looming economy troubles perhaps over-fits my biases, but it's still worth reading. The gist: Bryan...
Here is a sneak peek at some links from my weekly Weekend Reading column over at TheStreet.com: OPEC meeting this week, and a 1-million barrel cut may not be enough to stop falling prices (AP) Dissecting how credit rating agencies...
As the FT points out this weekend, economist John Maynard Keynes seems more relevant than every in the current financial crisis. As timing would have it, the FT piece comes as I'm in the middle of re-reading the one-volume version...
Okay, there is a second research piece worth pointing to after this long, strange week (month/year/etc.). Here it is, and be sure to read past the title. It's magnificently nutty & interesting stuff. Noblesse Oblige? Determinants of Survival in a...
This paper has been making the rounds, so after a tough week let's call it the research paper of the week. The gist: Given current economic conditions, we can expect heavier, older playmates going forward, with larger waist-to-hip ratios. All...
A quick survey of merger arb spreads, which have been coming down a little since short-selling has been allowed back. Still some big numbers out there, mostly reflecting nervousness about credit markets and financing. Note: I screened on deals announced...
Lots of people noticing today that for various technical reasons, U.S. 30-year fixed mortgage rates are back to levels last seen when Freddie/Fannie were nationalized. But that said, and as the following figures shows, all the bleating about high rates...
A few people have asked, so here is my (very) simple hedge fund outflow model. I think it is fairly conservative, but the assumptions are obviously key and open to wide disagreement. In essence, I'm aging hedge fund inflows and...
Some quick links to items of interest: Defaults coming in Brazilian agriculture (EMII) The Subprime Panic (SSRN) Peer-to-peer lending hits a hurdle (NYTimes.com) American's largest asset managers (EMII) Highland funds totalling $1.5-bllion to shut (Bloomberg) Credit Suisse/Tremont Hedge Fund Index...
News that Citadel Capital has had its worst year ever should be final confirmation, if needed, that the great hedge fund unwind is underway. If Citadel can't navigate the current year, then a good bet is that most current funds...
Staggering stuff going on tonight in Asian markets, with the Nikkei off 10.5%, taking it back to levels last seen when Ronald Reagan was in the White House. Equally interesting, in a macabre way, is how the Nikkei and Dow...
A dystopic email comment from my very smart friend Jeff Norman of Alpha Centauri Capital Management here in San Diego: Here's my prediction as to what will happen: If you played by the sensible financial rules all your life, saved...
Apparently it wasn't enough that British Prime Minister Gordon Brown took the global lead on recapitalizing the biggest banks during this credit crisis. He has also now decided to call a meeting of world leaders to create new rules for...
Nighttime skies in San Diego are less lit than in some other cities, but it's still a shock when you get outside the city at night and see the tapestry of stars overhead. There is a good piece on the...
I mostly agree with a new OpEd from the people over at Peterson Institute. Here is the crux: The Treasury should abandon plans to buy troubled assets (this can be handled by Fannie Mae and Freddie Mac, as necessary) and...
The smart and thoughtful FT columnist Martin Wolf was on Charlie Rose last night:...
Here is the quote of the day: Our ability to trade complex assets has completely surpassed our ability to understand those assets. - Philip Moyer, Edgar Online Only in securities markets would something so obvious -- and true --...
Some quick links to items of interest: Finger-pointing: It was the derivatives (Portfolio) Data Scraping Wikipedia with Google Spreadsheets (Source) Finger-pointing: It was the regulators' fault (WashPost) China calls post-Olympic time-out on commodity buying (BreakingViews) Citadel CDS spreads widening out...
Nice updated graph here -- and one sure to irritate the crap out of people -- comparing the Nasdaq, oil, and oil "bubbles". [via Bespoke Premium]...
Markets are amazing discounting machines -- they just don't always discount anything useful or important. Case in point: Their belated discovery today that not only are we in a consumer-led recession, but that said recession is going to continue and...
The folks at SmartMoney have newly added me to their Power 30 list. That's awfully nice of them. In all honesty, I don't feel like I warrant a full slot, maybe a fractional one, but I'll just accept the...
Should have mentioned it sooner, but I was on CNBC The Call today from 11am to noon EST. This is a weekly thing for me, so I regularly forget to mention it. The gist: We talked economics/layoffs (I argued we...
The ECB is really opening up in terms of collateral it accepts for loans: The Eurosystem will lower the credit threshold for marketable and non-marketable assets from A- to BBB-, with the exception of asset-backed securities (ABS), and impose a...
Just curious, but is anyone planning to 'fess up on the Lehman-related CDS losses last week? As I wrote last Thursday, there was oodles of worry about the auction, with some people tossing out apocalyptic numbers, the highest of which...
A typically literate and lovely column from Edward Chancellor in the FT today. It is on the historical parallels and context for the current credit crisis/panic, and it is wonderfully rich historical reading. Every panic is marked by a sense...
Nice presentation showing the credit crisis's arrival and mutations via a series of Economist magazine covers: The Economist Covers - The Financial Crisis Evolution View SlideShare presentation or Upload your own. (tags: japan usa) [via Jan Schultink]...
From the "more things change, the more they stay the same" file, an excerpt from a Thomas Jefferson letter in 1819:...
According to an intermittently interesting WSJ story tonight, Wells Fargo was the only bank Monday to fight the idea of signing up to a preferred share deal with the U.S. Treasury. It pushed back, Treasury pushed harder and the deal...
Time for another contest. Along with Fred Wilson, Mark Cuban, and Hal Varian, I am judging a competition at Slideshare. The idea: Come up with the best description/fix/forecast for the credit crisis in 30 slides -- or less. Enter the...
I know Nassim Taleb brings out strong feelings in people, but you have to admit the following quote from my friend Nassim is good: We refused to touch credit default swaps. It would be like buying insurance on the Titanic...
The current issue of Foreign Policy has a Luigi Zingales proposal for extending the current bailout to mortgage holders. The argument, of course, is that further waves of defaults just keep us standing still. The contrary argument is that no-one...
I like to approach the financial world with a thesis, an idea, at least in broad terms, about how things will play out, now and in the longer terms. I've tried to be clear about that in posts here, as...
Today's L.A. Times has possibly the most awesome accidental (I think) juxtaposition of a newspaper front page headline and cover picture in recent memory. Click on it for a larger version. Up in smoke, as it were?...
(This is completely random, so feel free to move on.) It has largely gone unremarked, but single-letter tickers have really gone out of vogue at the NYSE. While such tickers used to be the ultimate status symbol for upwardly-mobile blue-chip...
Tonight Jon Stewart noticed the recent first appearance ever on CNBC of the decabox -- ten talking heads in teensy on-screen boxes. That is, of course, up from the widely-noted octabox of a few weeks back. The entire episode of...
The heads of the nine big banks in the U.S. got briefed yesterday on Henry Paulson's equity injection plan -- they will all get new capital and we taxpayers as shareholders -- and then they ran for their limos, much...
Some interesting comments last Friday on Charlie Rose from investor Peter Thiel and Steven Pearlstein of the Washington Post. Granted, some of it was a little instantly dated, so be sure to get past the initial chatter about what the...
Expecting that we would have a market bounce Monday -- albeit nothing like the ultra-super-pogo-sproing thing that we did -- I launched a contest this past Sunday night. The idea: People had to predict how many times on Monday between...
Exxon Mobil was up a little more than 17% today. That works out to a gain of roughly $50-billion in market capitalization, or about the GDP of Luxembourg -- or six pre-Monday Morgan Stanleys....
Provocative post by John Jansen on regulating the markets via tying trader performance more closely to longer-term performance. It's an idea I've been pushing too, but John has articulated it better: In the current framework a trader’s focus is only...
In an update to my "surprise, surprise" file, reader Greg Church caught this release from the WHO: New virus from Arenaviridae family in South Africa and Zambia - Update 13 October 2008 -- The results of tests conducted at the...
936 points on the Dow. 11.1%. Oh. My. Goodness. Almost unbelievable. I'll leave to others to put it in context in terms of biggest-first-day-after-apocalypse-rebounds-on-prime-numbered-weekdays-in-October, but I'll just say this: the G7 put sure beats the crap out of the Greenspan...
This, boys and girls, is what you call a relief rally in markets. There are some staggering numbers out there, especially from Germany, Hong Kong, and Brazil indices. As I wrote in my weekend TheStreet column, this sort of move...
Huge congratulations to Princeton economist -- and part-time NY Times columnist -- Paul Krugman for winning the Nobel in Economics today. Mr. Krugman was the lone winner of the 10 million kronor ($1.4 million) award and the latest in a...
I want to warn people about another derivatives sub-market, one that gets far less attention than the purportedly $36-trillion market (or whatever the current claimed number is) for credit default swaps. It is something called "shares". You may not have...
Interesting tidbit in a Paul Krugman column in the Monday NY Times. He lauds U.K. Prime Minister Gordon Brown's approach to bailing out U.K. banks, and says Brown is the real agenda-setter here with his recapitalization program, as opposed to...
Great video (via Barry) of economist Irving Fischer talking stocks after the crash of 1929:...
I have an idea: Let's do a sentiment-check contest. How many times between 7am EST and 7pm EST on CNBC tomorrow will we hear the word "bottom" uttered? (We can't include me, as I'm on CNBC at 11am EST tomorrow....
I have more thoughtful posts queued up for later tonight, but for now let's do a quick spin through Asian markets and the U.S. pre-market futures. In short, the ever-solipsistic markets are (mostly) digging all the political happy-talk and...
The Deposit Trust & Clearing Corporation folks do some weekend working debunking myths about credit default swaps (or, as I like to call them, rodents of unusual size). Among other things, the DTCC says that net Lehman-related CDS fund transfers...
Here is a sneak peek at some links from my weekly Weekend Reading column over at TheStreet.com: European union to guarantee interbank lending (Marketwatch) The new age of frugality (BusinessWeek) MBA finance students keep their job hopes alive (NYTimes) What...
Economist Newsweek BusinessWeek ...
My friend Nassim "The Black Swan" Taleb lets loose about economists, forecasting, risk and the financial crisis while on a U.K. TV program....
Interesting new research paper in one of my favorite journals (Medicine & Science in Sports & Exercise). Two things caught my eye. First, that the likelihood of developing acute mountain sickness -- an altitude-related disorder that can be life-threatening --...
I missed this 9/17 NY Times column by quant finance svengali Paul Wilmott. Nicely timed and delivered market call: I’ve taken to comparing the current situation to “Hamlet.†We’ve had the deaths of Polonius, Claudius and Laertes — that is,...
Apropos of nothing in particular, this movie snippet has been running through my head all week. It just felt right, like it explained something or another that had been troubling me. General Jack D. Ripper: Were you ever a...
"We do what we understand, and no one understood those [subprime loans]," [Burke & Herbert Bank president] Burke explained. "We look dull and plodding." "Because we are dull and plodding," said his brother, C.S. Taylor Burke III, senior executive...
My friend Keith at Research Edge has been on a roll of late, and he is irked at Goldman. The reason? Its shelf registration of "indeterminate amount" that GS dropped on the market after the close on Friday. Goldman conveniently...
Given all the pain in markets last week, I thought it would be a good time to check in again on The Land That Financial Bad News Forgot. Yes, Pakistan. If you recall, the wise folks running the Karachi...
There is a truly numbing piece up on BusinessWeek's site about the mess that Lehman made via taking counterparty collateral obtained in one swap and using it as collateral in a myriad more. Post-bankruptcy, that has led to a...
La crédibilité de Paulson se rapproche de zéro. -- éconoclaste Give the French this: Even the most obvious things sometimes sound so much better when they say them. [via Felix]...
Good column from Steve Pearlstein in the weekend Washington Post. He argues that stop-gaps are now making things worse in the financial crisis, and we need to focus on the things that matter, as opposed to bailing out the bank...
Jeremy Grantham of GMO long-ago nailed the current crisis, and has long been a warning voice of lucidity here. The weekend Barron's contains a lengthy interview with Grantham, and it is worth reading in its entirety. The closing comments about...
Maybe it's just me, but this G7 statement struck me as vague even by the vague standards of the always vague G7. The G-7 agrees today that the current situation calls for urgent and exceptional action. We commit to continue...
I knew things were nutty toward the end of my time in the brokerage business, but, according to one analyst, it was beyond nutty, it was the actual inflection point that sent us hurtling toward where we are today. Sorry...
Lengthy discussion with ex-Fed head Paul Volcker on Charlie Rose last night. As a side note, Peter Thiel is on Rose tonight....
This is market is worse than a divorce. I've lost half my net worth, yet I still have my wife. -- Source: Anonymous. (I was sent it today by someone who overheard it, but wants to remain unidentified.)...
Quickly, before I take off, you can keep an eye on the Lehman CDS auction over at CreditFixings. The inside market midpoint is 9.75, but we won't see all the bids and really know how things shake out until 2pm...
I'm out today (Friday) and unlikely to be posting anything, other than perhaps late in the day. Take care of yourselves. Really....
People keep talking about the perils of nationalizing the banking system. Newsflash: There currently is no banking system, if by that you mean a network of organizations lending to one another and to quality companies in a predictable way. (Look...
Here is the Paulson Problem in a nutshell: If he doesn't speak, people panic because nothing is improving in the financial system If he does speak, people assume things are getting worse in the system, or that Paulson is doing...
Fascinating piece over at RGE Monitor by Nouriel Roubini on the back-room machinations that led to today, where the emphasis with respect to the $700b bank bailout is now on equity injections, not the flawed idea of purchasing banks' toxic...
This is completely anecdotal, but in flying around North America in recent weeks I have had fewer departure delays and more early arrivals than at any time in recent memory. I'm regularly getting in 10-30 minutes ahead of schedule, which...
Nothing to do with the looming financial apocalypse, but it's sunny and there is a fresh coat of snow up at Whistler BC. Life will (eventually) be okay....
Here is (according to Reuters) the timeline for what will be an epic CDS auction tomorrow related to the Lehman bankruptcy. There are huge losses to go around, confusion about counter-parties, and I expect a host of releases tomorrow afternoon...
Russia is trying out the time-tested "What me? No crisis" approach to managing its current market problems: The main channels have either downgraded or ignored altogether Russia's financial turmoil since it began in mid-September, according to media monitoring companies and...
Provocative comment from Jim Chanos this morning on CNBC: Given that it was the bank CEOs and broker CEOs who went to Washington calling for the ban, the question I would have loved to seen asked of (Lehman Brothers CEO...
Nice video from the people at Marketplace explaining collateralized debt obligations in terms of wine and wine glasses. Crisis explainer: Uncorking CDOs from Marketplace on Vimeo ....
Harrowing/amusing/disturbing chart from the folks at Bespoke today. It shows the percentage of the S&P 500 financial sector that a Paulson Buck ($700b) bought you over the last month since the TARP plan was announced:...
Fairly astounding data nugget on the collapse in daily rates charged by bulk shipping carriers: UNCONFIRMED reports a panamax was fixed for a voyage that covered bunkers and port costs only stunned London brokers today, as bulk carrier charter...
With the London Interbank Offered Rate (Libor) at record levels, thus hurting short-term borrowing, as well as blowing up many mortgages linked to the floating rate, it's useful to remind yourself how exactly Libor works. [via Bloomberg]...
Some quick links to items of interest: New special report from The Economist on current crisis (Economist) U.S. home equity extraction has hit lowest levels in more than a decade (Bloomberg) Nick Leeson: The government got you into this mess,...
Some harrowing if unsurprising data from S&P and PE Week Wire: Year-to-date, 60 of the 2,238 companies tracked by S&P with speculative grade debt are in default 22 of those 60 are are private equity backed, implying a 37% default...
With short-selling set to come back into the markets today, there are lots of worried people out there. I'll confess to being somewhat more sanguine, if only because I struggle to see how things could have been materially worse in...
Canada is not China. -- An anonymous ex-Fed official explaining U.S. eagerness to find Canadian buyers for U.S. banks. "Fed Trolls Canada to Rescue U.S. Banks" Let no-one say, pace Al Capone, that the U.S. still doesn't know...
After all this time Treasury is now getting around to saying it might start actively taking equity stakes in banks as part of a recapitalization program. Gosh. Now where have I heard that idea before? I can't quite recall. Oh...
I'll let this go more or less without commentary as it's just too good, but it is a headline from the NY Times on December 4, 1914. More here....
A piece tonight in the WSJ is painful reading about what is happening in California, the state first and most severely struck by the subprime credit crisis. There is the odd glimmer of light -- like that San Diego real...
Apparently Bill Gross's luck didn't stop with his latest Pimco missive wherein he said the Fed needing to begin buying commercial paper. Recall: That came out only an hour before the Fed announced just such a program. Now, according to...
Interesting new Federal Reserve Board paper out making the argument that changes in house prices hit property taxes -- and thus state coffers -- with a three-year lag. In other words, if you think states are suffering now, give it...
Sequoia Capital, one of the smarter venture firms in Silicon Valley, apparently organized a meeting yesterday for its porfolio companies telling them to get ready for a long economic downturn. It suggested ways to cut costs, and told them to...
There was a surprise today in the treasury market, with multiple issues reopened and more treasuries sold into said issues. But it was done in a huge hurry, with the market given something like an hour's notice, as if someone...
Some big and seductive moves going on, not least of which in tech, which was heavily beaten in the hedge fund GS VIP unwinding for redemptions. Look at this histogram of top-moving names among the larger cap tech stocks: [Update]...
Just in case you were thinking that it's you feeling worse than you've ever felt with respect to the current decline, it's not. It's the market. Year-to-date, this is now the worst decline in U.S. stock market history. [via Bespoke]...
Let's think about surprises. It seems entirely possible that we see at least some sort of technical bounce in here somewhere, so let's get past that and think about the future. What surprises lie ahead, whether positive or negative?...
After an initial paroxysm downward, there two worlds in capital markets today, depending on whether you're in the U.S. or ... pretty much anywhere else: [Update] Well, that ended quickly....
I'm not saying anything readers of this site don't feel viscerally, but what incredible times. Absolutely astounding. Tuesday's carnage on Wall Street after Monday's mess ... to see Iceland teetering on a species of receivership ... to see the Nikkei...
Useful new testimony out from Peter Orzag at the CBO on pension plan losses in the U.S. over the last year or so. At $2-trillion the headline number is huge, but you need to keep it in perspective. But that...
The obligatory tag cloud of Ben Bernanke's NABE speech today. Gosh, other than using scary words like liquidity, funding, Congress, developments, risks, stability, lending, rates and that sort of thing, I can't see why the market took it so badly....
Whatever your feelings on Jim Cramer, or Stephen Colbert for that matter, this segment from last night's Colbert Report is funny....
I know it's way too early to really start picking winners and losers in the current credit carnage, but let's at least start thinking about it. After all, one day this war will end. One quick candidate: CME. We are...
Blackly amusing tidbit from a Bloomberg piece about credit troubles at U.K. football clubs: The English Premier League has become a scoreboard for the global credit crisis. Newcastle players wear the logo of Northern Rock Plc, a U.K. mortgage-lender...
Some quick links to other items of interest: Excellent new IMF report on global financial (in)stability (IMF) ETFs Grab More Market Share, Reach 35% (IndexUniverse) AIG testimony documents from House Oversight Committee (House) Wall Street's meltdown is good for non-financial...
Shocks in developed economies are causing massive capital outflows in emerging economies. The point is driven home nicely by the following figure:...
If nothing else, the current credit crisis is giving researchers and analysts an opportunity to try out all sorts of new ways of visualizing truly unusual data. Case in point, the following heat map showing how the crisis has over...
A scan of some key headlines from Iceland over the last two years. People didn't notice, but in many ways credit crisis really started there -- with many of the same characters, like Moody's -- not with Bear Stearns and...
In one of the more remarkable moves in the current credit crisis, the Fed has announced it will start directly purchasing commercial paper: The Federal Reserve Board on Tuesday announced the creation of the Commercial Paper Funding Facility (CPFF), a...
I'm not sure which part of an absurd interview with writer Tom Wolfe to point to -- there are many idiocies to choose among -- but I'll just point to this one and go with it: The whole thing, starting...
Some quick links to items of interest: The CBOE set a volume record on option trading in September (CBOE) Best year ever for options traders (Bloomberg) List of the 31 (!) stocks with >$1b market cap and share price >$5...
It isn't much, but the most positive thing I've seen today is this paragraph hidden deep in a release from the President's Working Group on Financial Markets: The new legislation also enables Treasury to directly strengthen the balance sheet of...
Lots of chatter in various circles, including my weekend comments, that we could see the banking crisis in the U.S. and Europe mutate into a currency crisis in Europe. It is not an idle question to wonder what it might...
I'm also fond of this Lehman email, where the company's fine and upstanding executives plot to use a capital raise to buy back stock and hurt Lehman short-seller David Einhorn. Nice to see they have such productive capital uses in...
My current favorite Lehman email released for today's hearing is this one. I'm not sure whether I'm more amused by the "huge brand" comment, or the "kill the bad hfunds" thing....
You know, those public radio folks sure do good capitalism talk. Or at least This American Life does. The two most intelligent and accessible media segments on the credit crisis have now both appeared on that excellent Public Radio International...
Lest anyone think that having big-footed government beasties running through credit markets can happen without unintended consequences, think again. From a story in the WSJ about the Fed's plan to backstop the commercial paper market, this disturbing nugget: In mid-September,...
Something Wall Street has done very successfully in the current crisis is export risk. Through syndication it was able to move a lot of toxic paper around the world, perhaps not as much it wishes it had, but a surprising...
Yesterday's 60 Minutes segment on subprime and the evolving credit crisis was surprisingly good. Watch it....
Pimco's Bill Gross has out his latest missive, and if recent history is any evidence then it has a solid chance of being causal, as opposed to being merely predictive. The key part is this: A systemic delevering likely requires...
An interesting visualization of pulses and periodicity of the word "cramer" on Twitter today during the stock market festivities....
On days like today when the abyss seemingly yawns open, only to (at least temporarily) shut again, it's good to remind yourself that market participants are mad. Watch the classic Bird/Fortune skit again for a reminder -- especially the first...
Quick tag cloud of Lehman's Dick Fuld's testimony in the House this morning....
Former Fed chair Paul Volcker has chaired a new report/survey on global financial market regulation. It's very, very long, but it is worth reading. See here. One thing that jumps out, for better worse, is how much of an exception...
Some screenshots from the carnage out there today: WSJ NYT NYT Cramer's sell call...
Amidst all the equity carnage, some neck-snapping stuff going on today in exchange rates....
Quote of the day comes from 92-year-old investing legend Seth Glickenhaus: People are frightened and very angry. They feel that everything that has been done is to benefit Wall Street and these preposterous salaries and termination pay packages that leaders...
In about 10 minutes you'll be able to watch Dick Fuld of Lehman at Congressional hearings at this C-Span link. Should be amusing, and possibly market-moving....
Nice to see that the Feds aren't the only ones bailing people out. Tonight I see a release from BofA wherein it essentially bails itself out itself via a $8.4-billion mortgage modification program for people with home mortgages obtained through...
Lots of people are newly smart and chattering away about the essential stupidity of value-at-risk modeling. Oh, those dumb financial engineers, they keep saying, How stupid do you have to be to imagine that the real world would conform to...
There is a true keeper of a gloating column in Monday's Wall Street Journal from an Australian journalist explaining how wonderful, sound, and profitable her country's banks are, and how Australians long ago figured out that not everyone needs a...
With Germany and Ireland now having more or less made explicit 100% guarantees for all deposits, many people are wondering who's next in the face of the current credit crisis. Will it be the U.S., which only has about 64%...
Nice, useful figure from The Deal on how modern finance worked to create the subprime mess, or at least how it worked up until there stop being a functioning capital market. More here....
Here is a sneak peek at some links from my weekly Weekend Reading column over at TheStreet.com. Settlement day approaches for Fannie/Freddie credit default swaps on Monday (FT) The hottest banks for PE are those that offer vanilla checking, CD,...
While Time magazine has a somewhat over-the-top cover on the current issue, the underlying article by economist Niall Ferguson is worth reading, even if a little heavy on history and light on prescriptions. What's more, this is no longer...
The Economist magazine has the cover of the week on the credit crisis:...
I missed this column from earlier in the week, but writer Kenichi Ohmae has a nice piece in the FT on the three stages to expect in the current credit crisis. He models it on what happened to Japan during...
The next few weeks of C-Span will be like a new credit crisis reality TV show. Just look at all the upcoming hearings that will likely be broadcast: October 8, 2008: Causes and Effects of the Lehman Brothers Bankruptcy House,...
In many ways, Citadel’s structure today is probably more akin to an investment bank such as Goldman Sachs than the average hedge fund on the street. -- Standard & Poor's, talking about hedge fund Citadel Investment With hedge...
Here is the quote of the day: ...we and other global firms have, for many years, urged the SEC to reform its net capital rule to allow for more efficient use of capital. This is the single most important factor...
New chart out from the good folks at Bespoke showing that post-bailout credit default swaps on the banks and brokers have declined to merely catastrophic levels, down from apocalyptic earlier in the week. Whew!...
So let's say that TARP passes todaythe TARP bailout package has passed the U.S. House of Representatives. I could be wrong, but that seems reasonably likely (although some disagree). What happens next? Credit My guess is that things settle down...
Some quick links to a few non-market things on this busy Friday after a crazy week: Photos: The sapphire mines of Madagascar (Boston Globe) Auto-correlation among car traffic in tunnels (arXiv) The evolutionary diversification of religions (arXiv) 25 years of...
A few people have sent over variants of this after my earlier post about hedge funds' cannibalism practices, so might as well post it. Here is a graph of the Goldman Sachs VIP index of most widely-held hedge fund positions...
Some quick links to items of interest: Developer Sells Land Dirt Cheap To Reap Tax Benefits (WSJ) What Britain must do in the crisis (FT/Wolff) Private equity continues to have great parties, even if everyone's depressed (PE Hub) Unintended consequences...
I've been saying this privately for some time, but only now finally getting around to saying it here: In many ways, the banking crisis of 1872/73, less so the bank failures around the Great Depression, is the right mental model...
New Greenwich Associates survey out on how credit market problems are hitting companies of all sizes, both in terms of their ability to get capital and in their economic outlook: Forty-five percent of large U.S. companies say their access to...
Another in a regular series on blogs you may not be reading, but should be: Across the Curve. An astute and candid day-to-day look at the inner goings on in credit markets. Devastating stuff, of late....
A quick update on my Wells Fargo post from yesterday. Looks like Peter Eavis at the WSJ is pursuing a similar line, with a nervous piece in Friday's paper about "safe haven" banks Wells Fargo and U.S. Bancorp. Does he...
The nice thing about the hedge fund industry? Left alone in a room chasing returns long enough, it will consume itself and we will have one less over-levered bunch of crazies to worry about in this mass de-levering economy. Today's...
Quote of the day goes to my friends at CNBC who have a story up about consumers struggling to get credit. It contains the following quote of Jim Bianco dismissing the current Paulson plan as being unhealthily similar to a...
Great slide deck on making sense of the mortgage meltdown from a seminar today at the Milken Institute in Los Angeles. They always have the best and most data-rich slides, bar none. Required viewing, even if the page images via...
Almost two months ago I wrote a post here that frugality is the new black. I see that fellow TED-ster Juan Enriquez has an OpEd in today's Boston Globe saying something very similar -- he thinks we need to talk...
Buttercup: We'll never succeed. We may as well die here. Westley: No, no. We have already succeeded. I mean, what are the three terrors of the Fire Swamp? One, the flame spurt - no problem. There's a popping sound...
Today's quiz question: Only one OECD country does not have deposit insurance for individual accounts. The first person to name it in the comment section below gets the thrill of having me say "You were first". And for double-bonus points...
Nice Bloomberg chart of growth in U.S. real estate lending among major U.S. banks. You get a pretty clear idea of how badly timed Wachovia's buy of lender Golden West turned out to be, and how big of an inflection...
Two of my favorite semi-unusual places to watch for bank tells -- signs that a particular banking institution is struggling -- are Bankrate's 1-year CD page, and Mediaguide's weekly radio spending numbers. In the case of Bankrate, the indicator is...
Peter Wallison at AEI has out an attempted take-down of economist Paul Krugman ("Fannie, Freddie and You", 7/14/2008), and pretty much anyone else who thinks Freddie and Fannie's role in this crisis during the 2005-2007 period was irrelevant compared to...
Some quick links to a few things of interest: Wachovia limits fund access by colleges, inciting fears (NY Times) Ireland is a hedge fund (Andrew Clavell) Stop Treating Wall Streeters Like Villains and Resolve This Crisis (Economix/McTeer) CBO analysis of...
Thought-provoking quote from the opening paragraphs of a new Gillian Tett piece on "murky finance" over at the Financial Times. A couple of years ago, a senior investment banker berated me for using the word “murky†to describe the world...
Investor Warren Buffett was on Charlie Rose last night for the hour. Watch it. (And Charlie and Warren were apparently both here in San Diego yesterday, and neither one called. I'm hurt!)...
Some fairly staggering numbers in the September car sales data by brand. For the first time in recent memory, every single brand sold in the U.S. saw a decline in the month. Every one. The best performing brand, Audi, was...
Other than insisting on using notional value to really hike up the Fear Factor (and to irritate me), the current Fortune has a required reading article on credit default swaps (CDS). Best characterized as an insurance market run by under-capitalized...
A few people have asked via email why I haven't posted about the Senate's passage tonight of the Paulson plan, V2.217. The honest answer: I just don't care. Sorry, I don't. I'm exhausted from this crap, and I like the...
Quote of the day comes from an ex- fund manager friend who has -- to his chagrin -- called this credit crisis right at pretty much every step of its awful way. He offered up this movie line to...
Will someone please talk me down off the ledge with respect to Wells Fargo? I don't understand why the bank is being treated with kid gloves through the current credit crisis. Yes, it is better capitalized than its failed mortgage...
The total collapse of the venture-backed IPO market continues: Venture-backed company exits continued to lag in the third quarter of 2008, according to the Exit Poll report by Thomson Reuters and the National Venture Capital Association (NVCA). There was just...
If I read one more mark-to-market screed, I'm going to spit. The gist: An accounting change called FASB 157 pushed companies to mark their balance sheet items to market, and that's generally a good thing. It means that we have...
