After writing yesterday’s
post about the coupon on Citi’s mandatory convertible, I stuck around Andrew
Clavell’s new blog, Financial Crookery,
to see what else he’d written. And boy is this guy excellent: I’ve already added
him to the blogroll, despite the fact that he’s only published nine blog entries
He started off with a wonderful
evisceration of the financial advice given to a friend of his by a UK "independent
financial adviser" – advice which was, essentially, "put all
your money into investments which pay me the highest commission".
He then looked into the sum
total of mortgage-related losses, making this excellent point along the
Whatever the losses really are, this is all there will be. However
many times the risk is sliced and diced in ABSs, CDOs, CDO squareds, CPDOs
will not change the global picture.
He’s also very astute when it comes to John
Thain’s salary as CEO of Merrill Lynch:
I am all for incentivisation. But lets not delude ourselves that this is
what the compensation package achieves. Thain has a number of decisions about
Merrill’s future strategy to consider, admittedly. Yet I simply can’t see
any of those decisions having the fraction of the effect on the stock price
than the effect of the eventual resolution of the credit debacle over the
next 18-24 months. If the crisis is weathered, MER will be up $20 and $40,
even if Thain has sat in his office twiddling his thumbs (apparently he isn’t
a golfer). If things turn even uglier, so will MER. Anyone thinking that Thain’s
pending decisions will materially impact whatever transpires in "the
great credit market resolution" should email me whatever they are smoking.
The seeds have already been sown and the game will play out automatically,
if you pardon the mixed metaphor.
He can take well-aimed
digs at hedge fund managers (which is why it’s a bit weird that he seems
to like one-note hedge-fund apologist Veryan
Allen), as well as take a very sophisticated look at the
impact of loan covenants on share prices.
So Clavell is well ensconced in my feed reader, as he should be in yours.
And a very big tip of the hat to Seeking
Alpha, without whom I would never have found Clavell’s site.