Monthly Archives: October 2008

How CDOs Are Like Stocks

Posted on October 7, 2008 by Felix

I had lunch today with Moe Tkacik; I was talking about how I’ve always been much more comfortable in the world of bonds, which can be valued quite easily, rather than stocks, which are essentially impossible to value with any … Continue reading →

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Great Moments in Punditry, Kudlow Edition

Posted on October 7, 2008 by Felix

Larry Kudlow, July 2007: If you ask folks on Wall Street what their biggest worry is, most will say it’s another 9-11. They rank another attack far ahead of passing sub-prime mortgage problems or wiggles in consumer spending… I have … Continue reading →

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Mortgage Repayment Datapoint of the Day

Posted on October 7, 2008 by Felix

The real-world consequences of an elevated Libor: The average subprime borrower facing an adjustable payment for the first time next month would face a monthly payment increase of about 18 percent based on Libor rates as of Sept. 30, rather … Continue reading →

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The Burst Commodity Bubble

Posted on October 7, 2008 by Felix

Do you remember the food and commodity bubble? Sure you do. It wasn’t that long ago. The rise of India and China was inexorable, and the supply of food in general and meat in particular was never going to keep … Continue reading →

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The Iceland-Dow Connection

Posted on October 7, 2008 by Felix

Josh has been watching the Icelandic krona: This morning, the ISK reached a nadir of 350 ISK to the EUR, and I was placing phone calls to travel agencies trying to book the cheapest holiday of my life. Then, suddenly … Continue reading →

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Cap-and-Trade in the US

Posted on October 7, 2008 by Felix

Did you know that September 29 saw the largest carbon auction the world has ever seen? OK, it was pretty small on an absolute level — it raised just $39 million, and the price per ton of carbon emitted was … Continue reading →

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Ask Not What Your Country Can Do For You, Spanish Banknote Edition

Posted on October 7, 2008 by Felix

During WWII, plucky Londoners tore down their beautiful Victorian cast-iron railings, sending them off to be recycled into guns and tanks. Today, Spaniards are being asked to do something similar: Spanish officials were yesterday reported to be looking for ways … Continue reading →

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Roubini was Right

Posted on October 7, 2008 by Felix

I asked Nouriel Roubini this morning whether there was any way of getting institutions to start lending to each other, rather than the Fed being the only game in town. I got this in response: savor it, it’s probably the … Continue reading →

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Awaiting the Lehman CDS Auction

Posted on October 7, 2008 by Felix

Here’s an interesting theory: the reason that bank lending has ground to a halt is that everybody’s waiting until the results of the Lehman CDS auction, which is currently scheduled for October 10. "Banks are hoarding cash," says Elizabeth MacDonald, … Continue reading →

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TARP for CP

Posted on October 7, 2008 by Felix

Hey, the Fed has a new acronym! It’s called the CPFF (commercial paper funding facility) and it’s basically the TARP, only instead of buying toxic mortgage-backed securities, the government is buying commercial paper. The new facility is backstopped by the … Continue reading →

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Extra Credit, Monday Edition

Posted on October 7, 2008 by Felix

Carry Trade Bloodbath: AUD/JPY The European collective response: "Europe as a whole lacks a safe asset as focal, liquid, and available as T-Bills and now that is becoming a problem." Signs Of Panic: CNBC Talking Heads Multiplying Beyond Reason: The … Continue reading →

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Five Investment Principles

Posted on October 7, 2008 by Felix

There’s no rush. If an asset is cheap today, it’ll be cheap tomorrow. Think before you act. If an investment causes worry or stress, don’t make that investment. You should be happy with your investments. Your gut is a good … Continue reading →

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Bernanke’s in Charge of the Special Sauce

Posted on October 6, 2008 by Felix

Analogy of the day comes from Mohamed El-Erian, who likens the credit markets to a drive-thru burger joint: “Imagine yourself at the drive-thru ordering a Big Mac. At one window you order and pay, at the other – 20 feet … Continue reading →

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The Duplicitous Sheila Bair

Posted on October 6, 2008 by Felix

After Wachovia agreed to be bought by Wells Fargo on Friday, the FDIC’s Sheila Bair put out a press release saying that her agency "stands behind its previously announced agreement with Citigroup". Except, it wasn’t quite as simple as that. … Continue reading →

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Why I’m Not Buying the Financials

Posted on October 6, 2008 by Felix

At 10am this morning, Evan Newmark stuck his neck out, with a blog entry entitled "Why I’m Buying the Financials". They were spiralling downwards nastily at the time, but obviously the piece had been written long before the market opened. … Continue reading →

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Stocks: Are Retail Investors Buying?

Posted on October 6, 2008 by Felix

For many years, whenever any global economy threatened to run out of steam, the US consumer would step in to save the day. Now, it seems, the US consumer is tapped out — at least when it comes to personal … Continue reading →

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Topsy-Turvy Datapoint of the Day, Fannie Mae CDS Edition

Posted on October 6, 2008 by Felix

Reuters reports on the results of the Frannie CDS auction: Protection sellers on the companies’ subordinated debt were the biggest winners, with contracts on Fannie Mae’s subordinated debt recovering 99.9 percent of the sum insured… Credit default swaps on the … Continue reading →

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The Icelandic Response to Crisis

Posted on October 6, 2008 by Felix

If you’re looking for a sensible and coherent response to a major crisis, you could do a lot worse today than look to Iceland. The country’s current currency crisis happened because it’s so small. But the solution, too, is something … Continue reading →

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Where is Citi’s M&A Expertise?

Posted on October 6, 2008 by Felix

Bill Ackman made an interesting point at the Value Investing Congress today: Citi announced its deal with Wachovia on Monday September 29, at which point both boards had signed off on it. Given that all the specifics were in place, … Continue reading →

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Global Cardiac Arrest

Posted on October 6, 2008 by Felix

John Burbank of Passport Capital appeared at the Value Investing Congress this morning. I’m getting inured to scary prognoses at this point, but he managed to scare me by saying that GE, which is having difficulty rolling over its paper, … Continue reading →

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The Crisis Goes Global

Posted on October 6, 2008 by Felix

Europe’s woes are clearly the key driver for the big slump in global stock markets today: the credit crunch has moved decisively across the Atlantic, and has engulfed the other great home of leverage. But the biggest losers of all … Continue reading →

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Wachovia: Getting Messy

Posted on October 6, 2008 by Felix

The fight over Wachovia is getting messy. Court judgments are getting overruled; obscure provisions in the bailout legislation are taking on a crucial importance; the Fed is acting like King Solomon, splitting the baby between the West Coast and the … Continue reading →

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Lehman’s Lies

Posted on October 6, 2008 by Felix

The WSJ has a fantastic piece of reporting about Lehman’s failure this morning, which explains something I hadn’t understood until now. Yes, Lehman’s bankruptcy caused the credit crisis to get much worse. But the mechanism might well have been Lehman’s … Continue reading →

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Extra Credit, Sunday Edition

Posted on October 5, 2008 by Felix

Dear Investor: Dreadful returns from hedge funds. Agency’s ’04 Rule Let Banks Pile Up New Debt: Good narrative reporting from Stephen Labaton. The Economist’s poll of economists: They’re overwhelmingly pro-Obama. A Proposal for Money Market Funds, and More: I like … Continue reading →

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How Much Will a Wells-Wachovia Deal Cost Taxpayers?

Posted on October 5, 2008 by Felix

Anybody following the fight between Citi and Wells Fargo has to read Binyamin Appelbaum’s front-page piece in the Washington Post on the tax assumptions behind the Wells Fargo offer. In touting the deal, Wells Fargo executives said they did not … Continue reading →

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