Posts filed under “Credit”

Time to Warm Up The Helicopters?

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A few items worth passing along this morning: The "contained" housing slowdown, and the  "contained" subprime issue have now blown up hedge funds in the US, Australia, England, Germany, and France.

Deals for funding, stocks buybacks are now getting hit, as funding dries up for KKR, Home Depot, Cerebus/Chrysler, etc. The SEC is combing the books of Merrill Lynch and Goldman Sachs, looking to see how accurately the CDOs are priced on their books.

Speaking of intervention, the ECB got the choppers out yesterday, airdropping 94.8 billion in Euros onto the continent. The Federal Reserve announced they are "providing liquidity to facilitate the orderly functioning of financial markets."

Overnight, Fed Funds Rate had spiked towards 6%, and now after the 2 liquidity injections, are back to the 5.25%
overnight lending rate that is the Fed’s target. Rumor has it that the recent ECB & US Fed injections are now bigger than GDP of Argentina!

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A survey from the WSJ found almost half — 44% — of respondents want a rate cut.  (So much for free market economics!)

Rescue_me 

Are people truly that naive? Do they not understand what rate cuts will do the U.S.Dollar?

Then there is the concept of Moral Hazard. I am int he camp of WIlliam Poole, who has stated that speculators in these markets need to absorb their losses themselves. A rate cut that causes inflation is essentially a "cruelest tax increase."

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Sources:
Fed Issues Statement as It Moves To Reassure Jittery Markets   
DAVID WESSEL, JOELLEN PERRY, MONICA HOUSTON-WAESCH AND GREG IP
WSJ, August 10, 2007 11:10 a.m.
http://online.wsj.com/article/SB118673195378094167.html

Category: Credit, Derivatives, Federal Reserve, Psychology

Advice for Rich Uncles and Others . . .

Category: Credit, Derivatives, Investing, Markets

Open Thread: Bear Stearns

Category: Corporate Management, Credit, Derivatives, Finance, Psychology, Trading

A Short History of the Credit Boom & Bust

Category: Credit, Derivatives, Finance, Markets, Psychology, Real Estate

Notice to Loan Officers/Brokers

Category: Credit, Derivatives, Psychology, Real Estate

The “Chutzpah” of Bear Stearns

Category: Credit, Derivatives, Economy, Markets, Psychology

Understanding Credit’s Alphabet Soup

There were a couple of great graphics in the New York Times recently, explaining in some degree of detail, the machinations of the RMBS, CDO and CLO markets.

These are the packaged (and repackaged) holdings that are based upon the sub-prime mortgages that have been defaulting in such large numbers, and have been leading to hedge fund blow ups.

First up: todays front page article by Gretchen Morgenson: Mortgage Maze May Increase Foreclosures.

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06homegraphic550

Graphic courtesy of NYTimes

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Next up, the accompanying graphics to Floyd Norris’ The Loan Comes Due:

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Category: Credit, Data Analysis, Derivatives, Real Estate

Blaming the Retail Investor

Category: Credit, Derivatives, Financial Press, Investing, Markets, Psychology, Real Estate

Quote of the Day: “the stunning failure of responsibility”

Category: Credit, Derivatives, Earnings, Hedge Funds, Markets, Psychology

Credit-Market Tremors

Category: Credit, Derivatives, Finance, M&A, Markets