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Quote of the Day: Rampant Capitalism ?
From Canada, who may end up being more Capitalist then us Socialists in the USA: Two major related threats loom over the world economy: credit crises and rising inflation. What do these two menaces have in common? Bankers, hedge-fund managers, speculators and capitalism in general have been taking the hit for the economic turmoil, both for credit risk and inflation. But the looming collapse of Fannie Mae and Freddie Macin the United States should help change the focus a little. We are now getting down to the heart of the matter, which turns out not to be rampant capitalism but out of control back-door socialism. - Terence Corcoran, The culprits behind credit, inflation risks > Source: The culprits behind credit, inflation risks Terence Corcoran National Post, July 16, 2008 http://www.nationalpost.com/story.html?id=cf306bf6-4d57-4f21-8fca-442268368aff
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Paulson & Co Opening New Fund to Re-Capitalize Banks
There is no small amount of irony in this: "John Paulson, the money manager whose wagers against the U.S. housing market helped him earn an estimated $3.7 billion last year, is now seeking to profit from Wall Street's search for capital to offset mortgage writedowns. Paulson plans to open a hedge fund by December that will invest as the world's biggest banks and brokers add to the $345 billion they've raised in the past year, according to two people with knowledge of the matter. His Paulson & Co., which oversees $33 billion, hasn't set a size target for the fund, said the people, who declined to be identified because the plans aren't final. The New York-based firm's credit funds rose as much as sixfold last year, helped by bets that rising defaults on subprime home loans would pummel the value of mortgage-backed securities. The meltdown has forced the world's biggest banks and securities firms to take $467 billion in asset write-offs and credit losses and led to the collapse of Bear Stearns Cos. "Investors who are able to make money in a declining market and then rapidly turn around and profit from a rising market is highly unusual,'' said Thomas...
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"Dead Pledge"
What is a dead pledge? Well, that is the literal translation of the word mortgage: 1390, from O.Fr. morgage (13c.), mort gaige, lit. "dead pledge" (replaced in modern Fr. by hypothèque), from mort "dead" + gage "pledge;" so called because the deal dies either when the debt is paid or when payment fails. O.Fr. mort is from V.L. *mortus "dead," from L. mortuus, pp. of mori "to die" (see mortal). The verb is first attested 1467. The term comes from the Old French "dead pledge," and apparently meaning that the pledge ends (dies) either when the obligation is fulfilled or the property is taken through foreclosure: Coke, Edward. Commentaries on the Laws of England. ?[I]f he doth not pay, then the Land which is put in pledge upon condition for the payment of the money, is taken from him for ever, and so dead to him upon condition, &c. And if he doth pay the money, then the pledge is dead as to the Tenant? Now you know . . .
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Wall Street Got Drunk!
I'm not sure this really explains what happened. Any night I've been out in the city -- last night was Porter House, and Monday was Kellari Taverna -- Wall Street appeared to be enjoying a hearty supper and a glass of wine, but I didn't see any evidence of drunken behavior. > Of course, if your entire world view is predicated on the belief that tax cuts cure all ills, and that any sort of regulatory supervision -- even of FDIC insured banks by the Federal Reserve -- is an evil to be avoided, well, then, it might look like drunkenness to you. To everyone else, it merely looks like an incompetent administration executing an ill thought out philosophy, and poorly at that. > Related: Bush Seen as Jinx as Republican Candidates Avoid Party `Brand' Bloomberg, July 23 2008 http://www.bloomberg.com/apps/news?pid=20601070&sid=a1QaUnot5FTs&
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Those Damn Short Sellers Are Just Killing It!
There were a sew of articles in the papers today about just how much money those damned shorts are making! First up, the WSJ, who looked at who was killing it: "Some hedge-fund stars of 2007 are having an encore year. In the process, they are defying skeptics who questioned whether they could keep their runs going. John Paulson, who directed Paulson & Co. to gains of almost $15 billion last year, is up as much as 20% in some of his hedge funds through June 30, according to investors, thanks to continued bets on the woes of financial companies. Philip Falcone, who saw gains of about 120% in his largest hedge fund in 2007, gained 42% through June in that fund, Harbinger Capital Partners I, from various commodity-related investments, among other areas. It isn't necessarily surprising that investors who wagered against mortgage and housing-related investments are excelling, since the housing troubles have spilled over into 2008. The real challenge for these managers will be turning in similar performances when that gambit has run its course." Next up, Bloomberg focused on the total amount wagered on the short side: "Investors worldwide are betting more than $1 trillion on a collapse...
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