Monthly Archives: November 2008

Why Citigroup Imploded

Brad DeLong and Prince Alwaleed both have theories on why Citigroup imploded as it did. Brad thinks its a combination of factors — bad modelling of tail risks; bad modelling on the subject of house prices; an unprecedented spike in … Continue reading

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Obama’s Real Economic Team

On Saturday, the WSJ knew exactly who would be joining Tim Geithner in Barack Obama’s economic team: Congressional Budget Office director Peter Orszag will be Mr. Obama’s budget director. Jacob Lew, a former Clinton budget director, will head the White … Continue reading

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Berkshire’s CDS and Counterparty Hedging

In Barron’s this weekend, Andrew Bary brought up the subject of Berkshire’s credit default swaps, and why they’re trading at such a wide level: The Street talk is that Berkshire’s counterparties, believed to include Goldman, are worried about their Berkshire … Continue reading

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Citi’s Credit Barely Tighter

While most people are looking at the share price, Alea has the Citi CDS datapoint: 19bp tighter, at 482bp. That seems disappointing: what kind of a rescue is this, if Citi is still trading at levels more normally associated with … Continue reading

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Citi’s Share Price Problem

When it comes to judging the stock market’s reaction to the Citigroup bailout, there’s only one number that everybody’s looking at: the Citi share price, which opened Monday at about $5.80. What does this mean? Two things are worth bearing … Continue reading

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Has the FDIC Bumped Up its Deposit Insurance Again?

At 6am this morning, I got a peculiar email from Citibank — not as a journalist, but just as one of their depositors. The subject line was startling: Unlimited FDIC Insurance Coverage on your Citibank Checking Account The email continued: … Continue reading

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Extra Credit, Sunday Edition

Should "bad" financial contracts be banned? "No rational regulator concerned with substantive transparency would approve of common stock, if it were a novel investment vehicle. It guarantees no cashflows whatever; its "control rights" are so weak for most purchasers that … Continue reading

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Citi’s Underwhelming Bailout

If you want an idea of just how bad Citigroup’s position was on Friday, just take a look at the term sheet of the deal announced on Sunday night. After the $309 billion of toxic assets have been ring-fenced, Citigroup … Continue reading

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Ben Stein Watch: November 23, 2008

I think it’s fair to say that Ben Stein has officially capitulated. In his panicked and unhelpful column this week he says that the economy is "shot through and through with fear, even terror", and that things could get much … Continue reading

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Did Rubin Kill Citi?

The vipers’ nest of recriminations and finger-pointing that is Citigroup has now turned on the one man who was until now untouchable, Bob Rubin: Citigroup insiders and analysts say that Mr. Prince and Mr. Rubin played pivotal roles in the … Continue reading

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Extra Credit, Saturday Edition

The Auto Industry Bailout: Thoughts About Why GM Executives Are Clueless And Their Destructive “No We Can’t” Mindset What Securitization Problem? The F.D.I.C. Weighs In: Apparently most securitized mortgages can be unilaterally modified by servicers — if they’re seriously delinquent … Continue reading

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Obama’s Economic Team

Brad DeLong says there are six key economic policy jobs in the US government; we can now fill in most of the blanks. Running down Brad’s list: Office of Management and Budget director: Will be Peter Orszag, an excellent and … Continue reading

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Great Moments in Punditry, Felix Salmon Edition

Me, in July 2007, on the subject of the IPO of Kingdom Holdings, Prince Alwaleed bin Talal’s investment vehicle: Fancy investing in an extremely successful hedge fund without paying 2-and-20? … Kingdom could be the next Berkshire Hathaway (maybe it … Continue reading

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Geithner!

I’m pleased and surprised at the news that Tim Geithner will be the next Treasury secretary. Pleased because he’s an insightful pragmatist who’s more than qualified to do the job; surprised because I had thought that he might prefer to … Continue reading

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Berkshire Hathaway’s Peculiar Volatility Numbers

I just got off the phone with someone who’s been making good money shorting Berkshire Hathaway stock in the past few weeks; he pointed out to me something very peculiar in Berkshire’s public statements. First, look at the 10-Q for … Continue reading

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Who Will Take Over Citi?

As John Carney notes today, Citigroup’s market capitalization is $21 billion; that of Goldman Sachs is $20 billion. Can anyone say "merger of equals"? Nothing’s unthinkable in this market, not even the idea that you can tie two rocks together … Continue reading

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When Stocks Go to Zero

The percentage fall in the valuation of the stock market is, pretty much by definition, lower than the percentage fall in the enterprise value of America, Inc. And the more levered that America Inc was, the greater the difference between … Continue reading

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This is Not Financial Meltdown

Is this the low point of the crisis so far? From the stock market’s point of view, yes, it is. And the numbers coming out of the Treasury market would certainly seem to imply a flight to quality of unprecedented … Continue reading

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Extra Credit, Thursday Edition

U.S. Financial System Still Needs at Least $1.0 Trillion to $1.2 Trillion: Says FBR Capital Markets. The Mark Cuban charges – and the economic purpose of insider trading laws Access Uber Alles: Why is the NYT acting as Sallie Krawcheck’s … Continue reading

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What’s Happening to Berkshire Hathaway?

Jonathan Stempel of Reuters has a very useful look at what’s going on at Berkshire Hathaway, which fell $6,500 per share today to close at its lowest level in over five years. After reading his article, I think we might … Continue reading

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The Dangers of Looking to Washington for Help

Not since the House Republicans scuppered the first version of the TARP bill has the stock market paid so much attention to the legislative branch of government. I have no idea what’s going on on Capitol Hill: the WSJ is … Continue reading

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TIPS Strips, Redux

It took a bit of hunting, but I finally found someone who knows all there is to know about TIPS strips. Mike Pond is an Inflation-Linked Strategist at Barclays Capital (yes, that’s really a job, and yes, it still exists) … Continue reading

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Can GMAC Save GM?

GM and Chrysler aren’t just two troubled auto companies. They are also linked by GMAC, a financial company which used to be wholly-owned by GM and which is now 51% owned by Cerberus, which also owns Chrysler. GMAC has now … Continue reading

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Ugly

If you thought that the sudden sell-off from yesterday afternoon would reverse itself in morning trade, think again: this is looking increasingly like a secular down market rather than simply a case of high volatility. Citi’s down further this morning, … Continue reading

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Tasting menus

Pete Wells will tell you, and show you, and talk about, what you get for $1500: a 20-course meal, with paired wines. Gael Greene has the play-by-play, including this: Several tables have emptied even before the bacon. Foodists have to … Continue reading

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