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Monthly Archives: April 2008
Is There a Need for NYbor?
Are European banks significantly riskier than American banks? Looking at RBS’s decision to raise $24 billion in new capital, it certainly seems that way: the move will take RBS’s tier-one capital from a normal-for-Europe 4.5% up to a normal-for-the-US 6%. … Continue reading
Posted in banking, bonds and loans
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A Sensible Way of Buying Fixed-Income Risk
In a world where the Charles Schwab YieldPlus fund has fallen more than 25% this year alone, statements that bond funds just aren’t risky enough are likely to be met with a hollow laugh from some quarters. But it’s true: … Continue reading
Posted in bonds and loans, personal finance
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Extra Credit, Tuesday Edition
Bear Raid? Let me tell you about bear raids: "In most cases the raids just aren’t that effective, and, like firing a medieval musket, a bear raid is more a danger to the perpetrator than the target." RBS – bank … Continue reading
Posted in remainders
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How UBS Lost Money on Super-Senior Bonds
Yesterday I speculated that the reason banks got stuck with so many toxic super-senior CDO tranches was that they were unable to sell the things. Turns out, not so much. Check out the UBS report on its subprime losses (pdf … Continue reading
Posted in banking, bonds and loans
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American Apparel Responds to WSJ Takedown
On April 12, the WSJ published a 2,600-word front-page article on American Apparel which painted it as fiscally out of control. Not long afterwards, one of those tiny and niggly corrections appeared: American Apparel Inc.’s shares trade on the American … Continue reading
Posted in stocks
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How the Futures Conundrum Causes Higher Food Prices
On March 28, Diana Henriques examined the weird phenomenon of futures prices expiring well above cash prices in the agricultural-commodities market. Today, she returns to the same subject, from the point of view of farmers, who can be significantly damaged … Continue reading
Posted in commodities, derivatives, food
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Is There Still a Premium for Triple-A Debt?
One of the themes running through Roger Lowenstein’s NYT magazine magnum opus on the ratings agencies is the idea that debt becomes more valuable when you slap a rating on it, and that the higher the rating, the greater the … Continue reading
Posted in bonds and loans
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Jingle Mail: How do you Value Home Equity?
One of the biggest questions overhanging the housing market right now concerns the behavior of underwater mortgage borrowers. If the mortgage is non-recourse – and let’s assume for the moment that it is – does it always make sense for … Continue reading
Posted in housing
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Food is Made from Natural Gas
Paul Scheckel: Fertilizer production is second only to petroleum refining when it comes to industrial use of natural gas in the United States: 97 percent of the fertilizer applied to crops is manufactured from natural gas. With spiking energy costs, … Continue reading
Posted in commodities, food
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Murdoch Returns to his Mass-Market Roots
Rupert Murdoch seems to be quietly nearing a deal to buy Newsday from Sam Zell for about $580 million. That’s almost exactly the same amount of money as he spent on buying MySpace – an investment which Gillian Wee weirdly … Continue reading
Posted in Media, publishing
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RBS: Getting Stronger by Raising Equity
Even by this month’s outsize standards, the $24 billion that RBS is raising in new capital is an absolutely enormous sum. But it’s much more than a replenishment, it’s a significant augmentation: "In the light of developments during March — … Continue reading
Extra Credit, Monday Edition
Berkshire Hathaway Annual Meeting Crowdsourcing Experiment: Questions for Buffett and Munger. The Difference Between WordPress and Facebook, As Usual Google Is The King Dog. How Big Is Google? Here’s Another Measure: "As best as I can tell, Google sells more … Continue reading
Posted in remainders
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How to Make Fake Profits in the CDO Game
Gillian Tett has a good column on the super-senior game, in which she chastises banks for losing sums "larger than the gross domestic product of many countries" by entering into "a humongous, misplaced bet on a carry trade that was … Continue reading
Posted in banking, bonds and loans
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How Principles-Based Regulation is Like a Soccer Match
Jim Surowiecki gives the best description of the difference between rules-based and principles-based regulation, and why a principles-based approach makes sense, that I’ve yet seen: It’s something like the difference between football and soccer. Football, like most American sports, is … Continue reading
Posted in regulation
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Why Stockbrokers Need Close Scrutiny
Floyd Norris received an email today from a financial adviser who’s upset at the level of supervision in his industry. No, he doesn’t think there’s too little, he thinks there’s too much: “As a financial adviser at a major Wall … Continue reading
Posted in regulation
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How to Prevent Foreclosure, Ohio Style
Ohio Attorney General Marc Dann has one of the best plans for reducing foreclosures that I’ve seen yet. It targets homeowners rather than lenders, it costs a known and not particularly large amount of money, and it has the potential … Continue reading
Posted in housing
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Why Bloomberg Won’t Buy the New York Times
Newsweek and the NY Post are today resuscitating one of the perennial rumors in medialand: that Mike Bloomberg will somehow end up buying the New York Times. If the Sulzberger family was amenable – and that’s a big if – … Continue reading
Posted in Media, publishing
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Why Private Equity Shops are Recapitalizing Banks
Many banks are raising capital these days; the latest to hit the headlines are Washington Mutual, raising $7 billion from TPG, and National City, which is getting something north of $7 billion from a syndicate led by Corsair Capital. Such … Continue reading
Posted in banking, private equity
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Costs and Benefits in Education
It’s that time of year again, when students are deciding where they’re going to go to college. And the NYT is on the case. Today Greg Mankiw tells us that "the financial return to education" has never been higher: In … Continue reading
Posted in education
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Branding Art
Illinois artist Conrad Bakker, whose art has a habit of raising uncomfortable questions about price and value in the art world, popped round this afternoon on a visit to New York. Conrad makes all his own work – he doesn’t … Continue reading
Posted in art
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SocGen CEO Finally Resigns
Finally. SocGen CEO Daniel Bouton will officially resign as of May 12, and it seems like SocGen’s head of investment banking, Jean-Pierre Mustier, won’t last much longer either. Bouton will remain as chairman, but my guess is that’s a face-saving … Continue reading
Posted in banking, defenestrations, governance
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Lawrence Niren Reappears as a Pig
Convicted fraudster Lawrence Niren still hasn’t given up: I just received another fabulously crazy email from him, calling me an "egomaniac liar" and saying that his fake bid for Gold Fields wasn’t fake at all: For your information the Gold … Continue reading
Posted in fraud
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Deconstructing Libor
Henri, in my comments yesterday, has a smart way of looking at the TED spread. The TED spread between Treasuries and Libor, he says, is the sum of two other spreads: the Treasuries-OIS spread plus the OIS-Libor spread. OIS stands … Continue reading
Posted in bonds and loans
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Another Horrible Quarter for Citi
Citigroup’s earnings this quarter were horrible. So what’s the reaction? Internally, it seems weak: Citi’s announced the culling of 9,000 jobs, which sounds like a lot until you step back and look at the big picture. As CFO Gary Crittenden … Continue reading
JetBlue Pushes PayPal Option
As we saw with Frontier, airlines are at risk not only from high jet fuel prices but also from their credit card companies, who have the right to unilaterally hold back a very large percentage of any airline’s cashflow. I’m … Continue reading
Posted in personal finance
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