Monthly Archives: September 2008

When Stocks Soar

Posted on September 30, 2008 by Felix

If a stock ever moved resolutely sideways, it was Wachovia. From September 2004 until September 2007, it basically traded at $50 a share: sometimes a little less, sometimes a little more. And then it started a year-long decline, which culminated … Continue reading →

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Lies, Damn Lies, and Tourism Statistics

Posted on September 30, 2008 by Felix

In 1995, the owner of the Great Smoky Mountain Railroad sued Warner Brothers. The movie studio had used the railroad as a location for the train crash scene in The Fugitive, and the railroad had asked in return for an … Continue reading →

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What Just Happened to Google?

Posted on September 30, 2008 by Felix

If you’re a fund manager, you’re long Google, and you need to report the value of your position as of the end of the quarter, what on earth are you going to say? Google traded in a surprisingly narrow band … Continue reading →

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Hedge Funds: The Next Shoe to Drop

Posted on September 30, 2008 by Felix

You think things are bad now? Just you wait: the chart above gives you a very good indication of what Christine Williamson calls the "bloodbath ahead" in the hedge-fund industry. No one wants to be invested in an underperforming hedge … Continue reading →

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The Dysfunctional Credit Market

Posted on September 30, 2008 by Felix

One of the problems with a credit crisis is that it’s much harder to track fixed-income markets than it is stock markets. Name a stock or a stock index, and it’s easy to see how prices reacted to every minute … Continue reading →

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The Quantum Physics of the Bailout

Posted on September 30, 2008 by Felix

Right now I feel as though we’re all, collectively, like Schrödinger’s cat before the box is opened, except that instead of two different outcomes there are dozens. Will we revert to ad-hoc, case-by-case responses requiring no legislative approval? Will the … Continue reading →

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When the CDX Rolls

Posted on September 30, 2008 by Felix

I spoke this morning to Marc Barrachin of Markit, the company which owns and runs most of the benchmark CDS indices. Markit recently delayed, for a second time, the biannual "roll" where the components of its indices are updated to … Continue reading →

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How Bad Could Things Get?

Posted on September 30, 2008 by Felix

Your cheery upbeat forecast, on a day when stocks are up 3%, comes from Willem Buiter: If the markets fear that the nays have thrown their toys out of the pram for the long term, the following scenario is quite … Continue reading →

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When Regulation Works

Posted on September 30, 2008 by Felix

It’s rapidly become a cliché to describe the current crisis as one of a lack of regulatory oversight. But amidst all the recriminations about how the financial sector should have had much tougher regulation, there’s been precious little evidence that … Continue reading →

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Libor: 6.88%

Posted on September 30, 2008 by Felix

Are you in any way reassured by the dead cat bouce in various global stock markets? Don’t be. This is a credit crisis, remember, not a stock-market crisis: the impact on stocks is just collateral damage. And this morning, overnight … Continue reading →

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Extra Credit, Monday Edition

Posted on September 29, 2008 by Felix

Burn, baby, burn! Dow down 748: "The question we are facing right now is whether it is better to let an unstable edifice implode, and then attempt to build a new and better structure out of the rubble, or whether … Continue reading →

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How Risk Aversion is Evolving

Posted on September 29, 2008 by Felix

The good news: you just managed to sell your house, you got a decent price for it, and you’re sensibly renting for the time being. The bad news: so now what are you meant to do with your money? It’s … Continue reading →

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Stock Indices: The 10-Year View

Posted on September 29, 2008 by Felix

How have various stock indices done over the past ten years? The Brazilian Bovespa might have fallen by 10% today, but you’d still have been much better off there than here in the US. On the other hand, if you … Continue reading →

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Let the Flowers Bloom

Posted on September 29, 2008 by Felix

When the bailout as originally conceived was first announced, Pimco’s Bill Gross lost no time in putting himself forward as a steward of the $700 billion bailout fund. Assuming that no second vote succeeds and that the bailout in its … Continue reading →

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Looking for Hope

Posted on September 29, 2008 by Felix

Is democracy the winner here? Clearly, the people have spoken, through their elected representatives, and they’ve said no to the Paulson bailout plan. If that means a market crash, so be it. At 1,145, the S&P is now 27% off … Continue reading →

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Oh Shit

Posted on September 29, 2008 by Felix

The bailout act has just failed to pass the House, getting only 202 of the required 218 votes. This is what happens when you have a free-rider problem: it’s in Congress’s collective interest to pass the unpopular act. But if … Continue reading →

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Where Will Treasury Find Its Model?

Posted on September 29, 2008 by Felix

Steve Hsu has some ideas on how Treasury’s reverse auction might work; a new paper from NERA also considers the practicalities. The big question, of course, is how on earth one goes about valuing unique and hard-to-understand MBSs, CDOs, CDOs … Continue reading →

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Charlotte’s Web

Posted on September 29, 2008 by Felix

Did Vikram Pandit really just say what Heidi Moore says he said, on this morning’s conference call? The plan is to fold the U.S. retail bank into the Wachovia team. If I have this right, Citigroup might have bought Wachovia, … Continue reading →

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China’s Wen: “Cooperation is Everything”

Posted on September 29, 2008 by Felix

Chinese prime minister Wen Jiabao spoke to CNN’s Fareed Zakaria while he was in New York for the UN General Assembly last week. He very rarely gives interviews, and this was possibly his most open interview ever. From a financial-markets … Continue reading →

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Measuring the Credit Crisis in Markit Press Releases

Posted on September 29, 2008 by Felix

Markit’s CDX credit-derivative index was meant to "roll" — be updated with the most up-to-date set of credits — on September 22. The roll was first delayed by one week, and then, in a vote on Saturday, was delayed another … Continue reading →

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TED: 348bp

Posted on September 29, 2008 by Felix

There are some great comments on my blog entry from Friday about whether the TED spread really matters right now. With TED up to a whopping 348bp today, it’s worth addressing them. One thing which comes up repeatedly in the … Continue reading →

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How to Rescue a Bank

Posted on September 29, 2008 by Felix

What’s the best way to rescue a failing bank? Bear Stearns got bought by JP Morgan with the help of a $29 billion Treasury backstop. Northern Rock was nationalized. Lehman Brothers was allowed to fail outright, enter bankruptcy, and eventually … Continue reading →

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Extra Credit, Sunday Edition

Posted on September 29, 2008 by Felix

A BILL: "To provide authority for the Federal Government to purchase certain types of troubled assets for the purposes of providing stability to and preventing disruption in the economy and financial system and protecting taxpayers, and for other purposes. " … Continue reading →

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Should the Bailout Reduce Other Government Spending?

Posted on September 28, 2008 by Felix

The most annoying part of the first presidential debate, for me, was when the moderator, Jim Lehrer, asked the same question three times. Basically, he said that if you’re spending $700 billion on a financial bailout, then you’re going to … Continue reading →

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Ben Stein Watch: September 28, 2008

Posted on September 28, 2008 by Felix

Faced with Hank Paulson’s request for $700 billion to bail out troubled banks, everybody has their own idea which they think will work better. Including, heaven help us, Ben Stein: If we are actually thinking about tossing the Constitution out … Continue reading →

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