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September 2007

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7

Irrational Exuberance Revisited

September 28, 2007 – Comments (2)

I know that as a whole the market is not overvalued, and I am not suggesting that we have anywhere near the "irrational exuberance" that was being exhibited in 1999-2000, but boy are there some stocks that are just grossly overvalued.  Maybe I am crazy, but can someone convince me why the below deserve these rediculous valuations?  [more]

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Quote of the Day...

September 27, 2007 – Comments (3)

After Goldman Sachs analyst William Tanona yesterday slashed his quarterly earnings forecast on Merrill Lynch (MER) from $1.95 to $0.15 (no that's not a misprint) due to expected writedowns of $4 billion due to LBO Loan and CDO exposure, you have this from analyst David Trone of Fox-Pitt Kelton Cochran Caronia Waller (wow that's a long name) after cutting estimates by 37%, but still expecting earnings of $1.20 for the quarter on writedowns of $2.2 billion:  [more]

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Funny Money?

September 26, 2007 – Comments (2)

In reading through some of the investment banks' earnings call transcripts, I have noticed some eerily similar statements regarding the ways in which they were able to offset the massive writedowns in fixed income instruments with so-called "structured notes".  See below for some examples, and tell me this doesn't look a little sketchy:  [more]

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8

Big Day Tomorrow...

September 24, 2007 – Comments (4)

Tuesday brings ABS remittance data (mortgage prepayments, delinquencies, etc), Existing Home Sales, Consumer Confidence, and Case/Shiller House Price Index.

After today's negative sentiment afternoon, and considering the early remittance data looks BAD, I think starting tomorrow we reverse last weeks gains...

Thoughts/Predictions?

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5

Run On A Bank...

September 19, 2007 – Comments (2)

Check out this video of a true run on a bank - Northern Rock, which is one of the biggest lenders in the UK, has had over $4 billion in customer withdrawals in the last few days and had to be bailed out...

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Chart of The Day - Historical Fed Funds Rate vs. GDP Growth

September 18, 2007 – Comments (0)

Some interesting charts:  [more]

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7

House Price Appreciation?

September 17, 2007 – Comments (3)

There was a good article recently in Time Magazine which talks about the current problems in the housing market, but I would like to point to one section in particular highlighting research by economist Robert Shiller, of the Case/Shiller Index, which are the most widely followed HPA (house price appreciation) indexes:  [more]

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8

Bank Spank, Part 3 (For Real This Time)

September 06, 2007 – Comments (1)

This is the 3rd post in a series called "Bank Spank", highlighting issues within the investment banking & broker dealer/sector - the first two posts discussed Hung LBO Loans and Commercial Paper - and today's topic is Stuctured Products...specifically I will talk about consumer debt which is repackaged (securitized) into Asset-Backed Securities & CDO's.  This market has been a huge source of profits for banks, the high yields have helped investors to report outsized gains (up until July), and I think is most directly responsible for the huge increase in home ownership & consumer credit availability over the last 20 years - remember these things weren't around 20 years ago, and they didn't really start to take off until this century.  Well, maybe we were better off before anyone created a Synthetic Mezz ABS CDO^2 (squared) backed by sub-prime home equity loans.  The structured product market is the major cause of the current liquidity/credit crunch & repricing, and the state of the market right now is somewhere between "gloomy" and "the end of the world as we know it."  [more]

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Bank Spank, Part 3

September 05, 2007 – Comments (1)

I was going to post the 3rd in a series of posts I like to call Bank Spank - the first 2 posts being about hung LBO loans and Commercial Paper - and all of them outlining why I think the investment banks & broker/dealers are due for some really ugly quarters, and why we are heading towards a recession - but there is so much doom and gloom out there in the news today I thought I would just highlight a few interesting articles instead:  [more]

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Bank Spank, Part 2

September 04, 2007 – Comments (3)

This is part 2 in the series which I call Bank Spank - highlighting why I believe things will get a lot worse before they get better for the major investment banks/broker-dealers, and how people are underestimating the ugliness that will be reported in 2007/08 results - catch up if you missed part 1, discussing hung LBO loans.  Today we will be talking about ABCP, or Asset-Backed Commercial Paper.  [more]

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