Author Archives: Felix

Should CFOs be Economic Pundits?

Posted on April 24, 2008 by Felix

Kevin Kelleher, like me, listened to the Apple conference call yesterday. Both of us picked up on this exchange: Mike Abramsky – RBC Capital Markets And then final question, you haven’t said anything in your call about economic headwinds. It’s … Continue reading →

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Do People Drive Less When There’s a Carbon Tax?

Posted on April 24, 2008 by Felix

Peter Zimonjic makes an important point today: that a carbon tax, in itself, and over the short-to-medium term, will have very little effect on gasoline consumption. What Zimonjic doesn’t mention is that this is no reason not to implement a … Continue reading →

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Condos With Embedded Puts

Posted on April 24, 2008 by Felix

People say that given the non-recourse nature of mortgages in states like California, homeowners don’t normally buy their houses so much as buy a call option to buy the house at the purchase price, along with a put option to … Continue reading →

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Extra Credit, Wednesday Edition

Posted on April 23, 2008 by Felix

Global CDO Issuance: CRASH !!! International financial system was close to the brink – Credit Suisse ex-CEO Weighing a McCain Economist: He looks like "the least fiscally conservative candidate still in the race". The homeownership ideology: "Only an ideologue would … Continue reading →

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Getting Empirical on Subprime Losses

Posted on April 23, 2008 by Felix

Tom Brown has a very interesting essay over at bankstocks.com, where he looks at 2006-vintage subprime mortgages and tries to come up with a cumulative loss rate for them. He makes the reasonable assumption that the ABX index represents subprime … Continue reading →

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The Semiotics of Stock Tickers

Posted on April 23, 2008 by Felix

Living in New York, one sees stock tickers quite often – crawling along the bottom of a TV screen, scrolling around a building in midtown, even crowning the burger flippers at the McDonalds at 160 Broadway. What are they for? … Continue reading →

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Murdoch in Welcomed-by-the-Union Shocker

Posted on April 23, 2008 by Felix

This might be a first: has an acquisition by Rupert Murdoch ever before been welcomed by a newspaper’s unions? “We’d appreciate anybody coming in here that has a newspaper background, that knows New York, whether it’s Zuckerman or Murdoch or … Continue reading →

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Can We Trust the TIPS Spread?

Posted on April 23, 2008 by Felix

Add Wolfgang Münchau to the list of inflation hawks. If the Fed ignores inflation while putting out more urgent fires in the financial markets, he says, "the US bond market would implode, the current account deficit would become impossible to … Continue reading →

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How Economic Illiteracy Could Doom Gordon Brown

Posted on April 23, 2008 by Felix

Gordon Brown is arguably the most economically literate head of state in the world. Which is maybe why he felt comfortable tinkering with the UK’s income-tax system. But as John Kay says, Tax is always more complicated than you think … Continue reading →

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Is There a Need for NYbor?

Posted on April 23, 2008 by Felix

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 →

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A Sensible Way of Buying Fixed-Income Risk

Posted on April 23, 2008 by Felix

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 →

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Extra Credit, Tuesday Edition

Posted on April 22, 2008 by Felix

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 →

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How UBS Lost Money on Super-Senior Bonds

Posted on April 22, 2008 by Felix

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 →

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American Apparel Responds to WSJ Takedown

Posted on April 22, 2008 by Felix

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 →

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How the Futures Conundrum Causes Higher Food Prices

Posted on April 22, 2008 by Felix

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 →

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Is There Still a Premium for Triple-A Debt?

Posted on April 22, 2008 by Felix

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 →

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Jingle Mail: How do you Value Home Equity?

Posted on April 22, 2008 by Felix

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 →

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Food is Made from Natural Gas

Posted on April 22, 2008 by Felix

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 | 1 Comment

Murdoch Returns to his Mass-Market Roots

Posted on April 22, 2008 by Felix

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 →

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RBS: Getting Stronger by Raising Equity

Posted on April 22, 2008 by Felix

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 →

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Extra Credit, Monday Edition

Posted on April 21, 2008 by Felix

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 →

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How to Make Fake Profits in the CDO Game

Posted on April 21, 2008 by Felix

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 →

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How Principles-Based Regulation is Like a Soccer Match

Posted on April 21, 2008 by Felix

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 →

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Why Stockbrokers Need Close Scrutiny

Posted on April 21, 2008 by Felix

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 →

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How to Prevent Foreclosure, Ohio Style

Posted on April 21, 2008 by Felix

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 →

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