Posts filed under “Finance”

Technology & Finance Bubble Aftermaths

Another pair of charts courtesy of the terrific Ron Griess of The Chart Store.

The first looks at the 2000 bubble in Technology, and how stocks behaved after that crash. The second is a look at a similar boom and bust — the financial sector bubble and collapse.

The technology boom was actually bigger than finance in terms of the SPX — it hit 33% of the S&P500 from 5% over 6 years. However, the finance boom lasted much longer, covering 15 years and rallying from 6% to 22% of the S&P500. I have not crunched the numbers, but I suspect that as a percentage of GDP economic activity, the finance boom was considerably larger.

Given that we know market history does not repeat precisely, but so often rhymes, the question confronting investors today is this: Will the future of the finance sector be similar to that of tech?

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Information Technology as a Percentage of S&P500

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Financials as a Percentage of S&P500

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This places the current reaction of the finance sector somewhere in mid 2003, following the first major bounce.

Category: Finance, Markets, Technical Analysis, Technology

Worsening Bank Loans

Floyd Norris on the bad  — and worsening — loan problem: “OVERALL loan quality at American banks is the worst in at least a quarter century, and the quality of loans is deteriorating at the fastest pace ever, according to statistics released this week by the Federal Deposit Insurance Corporation. The report highlighted that even…Read More

Category: Credit, Finance

End of “Dumb Money” Era for Private Equity

Dan Gross:

“Nine of the 10 biggest leveraged buyouts were done between 2006-2007. They bought into cyclical industries right at the peak and loaded a ton of debt on them, which is not a winning proposition.”

May 01, 2009

Category: Finance, Video

How Over-Extended is FDIC Insurance ?

Very. At least, that’s according to Rolfe Winkler’s analysis of the Depositor Insurance reserve ratio: > Rolfe: [Look at] FDIC’s 12/31/08 balance sheet. Note at the bottom of that link the estimate for total insured deposits: from Q3 to Q4 it increased only a smidge, to $4.8 trillion from $4.6 trillion. Odd, no?  Why such…Read More

Category: Bailouts, Credit, Finance

Goldman Sachs, Morgan Stanley vs Rivals

> Source: Resurrection on Wall Street ANDREW BARY Barron’s March 16, 2009 http://online.barrons.com/article/SB123698562029125353.html

Category: Bailouts, Digital Media, Finance

iBanks Grabbed $50 Billion in AIG Bailout Cash

Yesterday, in Backdoor Bailouts for Goldman Sachs?, we noted that GS, as well as Morgan Stanley, Merrill Lynch, and Deutsche Bank, were all made whole on their bad bets with AIG. That’s right, what was misleadingly described as systemic risk turned out to be in large part little more than a counter-party bailout — money…Read More

Category: Bailouts, Corporate Management, Finance, Legal, Markets, Politics, Really, really bad calls

Failings in Structured Finance Agency Conflicts

As we begin to address regulatory reform in the financial services industry there is a clear consensus view that the credit rating agencies played a role in fomenting the crisis environment. In February 2007, Joe Mason and I presented a paper warning of the risks that CDO market problems would present in the capital markets…Read More

Category: Credit, Derivatives, Finance, Markets, Real Estate, Really, really bad calls, Research

Volcker Urges More Transparency in Hedge Funds/Private Equity

Live! From Capitol Hill: Former Fed Chairman Paul Volcker Testifies in Front of Senate Banking Committee

Bloomberg, February 05, 2009

Category: Finance, Video

Blame the Enablers

I couldn’t agree with this article more: Madoff Enablers Winked at Suspected Front-Running. I look at Madoff as a Sociopath — he is a sick individual. The enablers, on the other hand, were simply greedy hacks who didn’t, (and probably couldn’t) do the suitable investigation and due diligence into Madoff’s asset management business. Were they…Read More

Category: Finance, Investing, Legal, Regulation

Nationalize Like Real Capitalists

Steve Randy Waldman writes the blog interfluidity. His take is usually away from the mainstream, and always interesting. His most recent discussion on Bank Nationalization is quite interesting ~~~ It will come to no surprise of readers of this blog that I favor nationalization of failed, systemically important banks. But James Surowiecki and Floyd Norris…Read More

Category: Bailouts, BP Cafe, Credit, Finance