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November 2007

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8

Fool Me Once...

November 30, 2007 – Comments (4)

Just the other day, Citigoup said they "will not consolidate the assets of the SIVs," talking about bringing the roughly $65 Billion worth of SIV debt that Citi has exposure to back on their own balance sheet.  Well, they might not have a choice.  [more]

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12

Are We There Yet?

November 26, 2007 – Comments (1)

Nary a day goes by when the average investor doesn't come across an acronym they haven't heard of before - CDO, SIV, ABCP, and now you can throw VIE (Variable Interest Entity) on that list.  Today, CNN Money ran a story discussing the various ways banks were able to use conduits to move assets off their balance sheet and provide leveraged returns (and not telling anyone), while at the same time maintaining the ultimate credit risk were these off balance sheet vehicles to run into serious problems.   [more]

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11

Fools Rush In?

November 20, 2007 – Comments (3)

It seems these days you can't go a week without reading a "breaking story" about how speculation from "reliable sources" suggests that Warren Buffett might be buying up large blocks of shares of such and such company - here are just a few examples:  [more]

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8

I See Said the Blind Man

November 13, 2007 – Comments (0)

This market has my head spinning.  I think everyone is saying “what a difference a day makes”, but that is especially true of Monolines (Bond Insurers), as MBIA (MBI) & Radian (RDN) were up over 15%, Ambac (ABK) was up 10% and ACA was down over 12% (but that’s another story – see yesterday’s post).  Today the Wall Street Journal, citing “people familiar with the matter”, speculated that Warren Buffett’s Berkshire Hathaway could be interested in providing capital to or buying one of them.  Keep in mind this is the same industry which just a few days ago had analysts saying they face a “downward spiral” and “our confidence that guarantors will survive the credit meltdown is waning…”  [more]

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11

Gone Baby, Gone?

November 12, 2007 – Comments (5)

Until very recently, nobody paid much attention to Monolines, the companies which provide guarantees on Municipal Bonds, Asset-Backed Securities, CDO’s & such.  The industry has gone from a conservative insurance-type business providing steady returns to the bottom line and the stock prices of these shops for 13+ years.  Now, the future of the industry which has guaranteed over $1 trillion, yes TRILLION, worth of securities are in danger of not surviving according to several analysts:  [more]

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9

How Low Can We Go?

November 11, 2007 – Comments (2)

Every investor is wondering just how bad the mortgage market can get, and how it's possible that a multi-trillion dollar market could crumble so quickly.  The simplest way to picture this is to glance at the price charts for the ABX indices, which are made up of Credit Default Swaps on 20 Residential Mortgage Backed Securities (Sub Prime ABS).  Basically, they are a tool by which investors can either speculate or hedge the risk that the underlying securites will be repaid in full.  I highlight the indexes for the 1st & 2nd half of 2007 because they have already proven to be the worst vintages, and I show the highest (AAA) and lowest (BBB-) rated tranches just so you can understand how so many players can take such large losses even on such highly rated securities...  [more]

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8

Perception Is Reality...

November 09, 2007 – Comments (3)

So what changed the mind of the market in just the last week?  Everyone knew that things were going to be awful for homebuilders, banks, brokers, etc. but the argument went that these problems would not spillover into the broader US economy.  The trailing economic indicators were strong, the weak dollar was driving strong export growth, and there was to be a new golden age for technology companies.  Well, it seems there were 3 key drivers that convinced the market that all is not well:  [more]

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13

Help! I've fallen and I can't get up...

November 07, 2007 – Comments (6)

There have been a lot of numbers thrown around the last few days regarding write-downs at the banks / broker-dealers (and as I'm writing I see Morgan Stanley has just joined the party, adding $3.7 Billion to the pot), but this one tops them all:  [more]

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5

A Bank Worth Buying?

November 05, 2007 – Comments (0)

As any of you who have read my posts know, I have been extremely bearish on banks and broker-dealers since I started blogging back in August (see here, here, or here for a sample).  The main reason is I see the reality of the calamity up close every day, since I work for one of the large US Banks.    [more]

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10

Down Goes Another One...

November 04, 2007 – Comments (3)

As I'm sure everyone was expecting, iit was announced that Citi's CEO Charles Prince resigned today.  What was not expected was the other announcement they made - they will have writedowns of another $8-11 BILLION on top of the ~$6.5 Billion hit they already took.  The markets were already spooked, Prince is the 2nd major CEO in as many weeks to step down after Merrill's Stan O'Neal, and we are still early in the game here.  After the major banks reported their 3rd quarter results and disclosed roughly 30 Billion in writedowns, the market breathed a sigh of relief with the expectation that it was better for all of them to take the pain now all at once, and there would be a more clear picture of the future.  Don't think Citi is alone - read through the earnings transcripts of Bear, Merrill, UBS, Morgan Stanley...just about all of them have $10's of Billions of this stuff on (or off) their balance sheets.  I don't care if it's AAA super-senior - just look how far AAA ABX has fallen and you will have an idea how ugly it's going to get...the only question is how much does the mighty Prince get in severance for basically running the most globally integrated financial institution into the ground in only 4 years...  [more]

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8

Stocks & Bongs

November 02, 2007 – Comments (1)

If you haven't heard, the Journal had a story yesterday about Bear Stearns CDO Jimmy Cayne.  Supposedly as his hedge funds were imploding, he was out playing bridge and golf every other day...oh yeah and he's a pothead too:

 

 

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7

Expensive Haircuts

November 01, 2007 – Comments (0)

And you thought John Edward's haircuts were expensive?   [more]

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