Author Archives: Felix

The Upside of Low Housing Starts

Posted on January 17, 2008 by Felix

I’m a little bit confused about all the pessimism surrounding today’s housing starts figures. Yes, they’re low – but remember we’re talking about starts here: people and businesses brave or foolhardy enough to start building brand-new homes in an economic … Continue reading →

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Merrill: How to do a Conference Call Right

Posted on January 17, 2008 by Felix

I wasn’t on the Merrill call this morning, but David Gaffen was, and it seems from his live-blog – and the Merrill share price – that John Thain just gave the market a masterclass in spinning negative announcements. Rember that … Continue reading →

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The End of Mortgage Brokers, Part 2

Posted on January 17, 2008 by Felix

I got some very interesting responses to my blog entry yesterday on mortgage brokers, in which I basically said that they were parasites on their way out who wouldn’t be missed. Ken Houghton reckons that there must be some good … Continue reading →

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Extra Credit, Thursday Edition

Posted on January 17, 2008 by Felix

Banking pay just won’t go away: Andrew Clavell defends the banks. "Mortgage borrowers and mortgage-asset investors were both long housing assets, the former with a call option on the upside, the latter by shorting puts on the downside for yield … Continue reading →

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Bernanke: A Wise Man at the Fed

Posted on January 16, 2008 by Felix

Portfolio contributing editor Roger Lowenstein has an excellent profile of Ben Bernanke in the NYT this weekend; it hit the web today. Lowenstein is sympathetic, and admiring, but not uncritical: he says at one point, for instance, that "Bernanke must … Continue reading →

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Inflation Expectations: Coming Down

Posted on January 16, 2008 by Felix

Back at the beginning of the year, I recommended putting in a non-competitive bid for 10-year TIPS at the January auction on January 10. Now that’s happened, I can link to the results: my hypothetical bid would have picked up … Continue reading →

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The Economics of Second Liens

Posted on January 16, 2008 by Felix

Ruth Simon has a huge piece in today’s WSJ on second liens: home equity loans and lines of credit which are junior to primary mortgages. These things can cause a lot of trouble for homeowners: "The people in the first … Continue reading →

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Mortgage Brokers, RIP

Posted on January 16, 2008 by Felix

"The broker model is broken," says Calculated Risk today, citing comments from Jamie Dimon of JP Morgan saying that delinquencies on broker-originated loans are three times higher than on loans originated in-house. What’s more, says Peter Paul Jackson of Housing … Continue reading →

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The Bigger the Bank, the Better the Return

Posted on January 16, 2008 by Felix

Update: I got this one wrong: see the comments for all the gory detail. Big-bank stocks are riskier than small-bank stocks, which means they go up more than small banks do in up markets, and they go down more than … Continue reading →

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The Argument for Neglecting Laid-Off Workers

Posted on January 16, 2008 by Felix

Steven Landsburg has a provocative op-ed in the New York Times today. Essentially, he says that we should do absolutely nothing about American workers who are on the losing side of globalization: All economists know that when American jobs are … Continue reading →

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Causality in NY Post Headlines

Posted on January 16, 2008 by Felix

"FALL ST." is the headline splashed across the front page of the New York Post this morning. "Plunge sparks recession fear". OK, maybe Tuesday was a bit of a slow news day. But check out the causality there: it’s the … Continue reading →

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Extra Credit, Wednesday Edition

Posted on January 16, 2008 by Felix

Citigroup, Merrill Lynch Get $21 Billion From Outside Investors: Bloomberg has another one of those handy cut-out-and-keep tables of who’s invested what in whom. Wealth and Fame: Equity Private worries, on behalf of hedge-fund managers everywhere, about the risk posed … Continue reading →

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Giving the Poor More Money: Would They be Able to Cope?

Posted on January 15, 2008 by Felix

Greg Mankiw reacts today to the CBO’s declaration that if you want fiscal stimulus, a temporary increase in food stamp benefits would provide the most bang for the buck. I wonder if we really want to target such cyclical measures … Continue reading →

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Whatever Happened to Citicorp?

Posted on January 15, 2008 by Felix

Dana Cimilluca notes that shares in Citigroup, today, are below the level at which shares in Citicorp were trading before it merged with Travelers. Now, that’s not necessarily a fair comparison: Citigroup, today, has a market capitalization of $135 billion, … Continue reading →

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A Bear Market: Where Good News is Punished

Posted on January 15, 2008 by Felix

Stocks in general are down about 2% today, but the big losers are all the companies in the news. Merrill Lynch has found itself $6.6 billion of new equity? Down 3.9%! Citigroup has found even more, to offset an $18 … Continue reading →

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Which is Risker: Hedge Funds or Index Funds?

Posted on January 15, 2008 by Felix

Veryan Allen, the blogosphere’s favorite hedge-fund apologist, spent New Year in Las Vegas. He’s quite excited about his slot-machine returns (he won $1000 after putting in $20), which he semi-facetiously describes as "alpha". He does seem serious, however, when he … Continue reading →

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The Downside of Road Tolling

Posted on January 15, 2008 by Felix

Peter Swan and Michael Belzer don’t think much of toll-road privatization. If you hike road tolls to maximize profits, they say, then you end up with a large number of trucks taking second-best routes – something which is inefficient, unpleasant, … Continue reading →

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Why is The Weill Family Foundation Injecting Capital into Citigroup?

Posted on January 15, 2008 by Felix

Among the investors bailing out Citigroup with new equity capital is The Weill Family Foundation, a charitable foundation set up by Sandy Weill. Now the way that these charitable foundations work, they generally give away some small amount (maybe 5%) … Continue reading →

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Citi: Negative Revenues

Posted on January 15, 2008 by Felix

I’ll leave the live-blogging of the Citi conference call (slides here) to David Gaffen and Floyd Norris. Norris has already made two excellent points: he’s wondering why Citi’s still paying a dividend at all, and he’s noted that US revenues … Continue reading →

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Extra Credit, Tuesday Edition

Posted on January 15, 2008 by Felix

Running Numbers: Surowiecki on how much the payrolls report can be trusted. Citi and the Kitchen Sink Theory: "Banks cannot just arbitrarily decide how large they want their write-downs to be. But assigning values to mortgage-related securities these days is … Continue reading →

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The Economics of Cheap Sofas

Posted on January 14, 2008 by Felix

Tim Harford on Ikea: When a typical London home costs £300,000, why are cheap sofas to put in it still such a tempting offering? Unfortunately, Harford doesn’t answer his own question. Maybe it’s precisely because houses are so expensive that … Continue reading →

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Predatory Borrowers

Posted on January 14, 2008 by Felix

Barry Ritholtz, econoblogger extraordinaire, fired harshly at Tyler Cowen, econoblogger extraordinaire, on Sunday, with a blog entry originally entitled "Tyler Cowen, Apologist for Fraud?". Ritholtz has since toned down the headline, but the substance of his criticism stands, and it’s … Continue reading →

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CNBC-Related Stock Moves, Part 2

Posted on January 14, 2008 by Felix

Interested in buying stock in Converted Organics? Too late. The Peanut Gallery has the intraday chart: Today, another stock I have been following was mentioned on CNBC, (COIN: 12.40 +42.53%). Look at the chart and see if you can tell … Continue reading →

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The CDS Losses Arms Race Continues

Posted on January 14, 2008 by Felix

There seems to be some kind of an arms race going on to see who can come up with the scariest number for total losses in the credit default swap (CDS) market. Remember Bill Gross with his $250 billion? Well … Continue reading →

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When a Forecast Shouldn’t be Charted

Posted on January 14, 2008 by Felix

Silly chart of the day comes from Morgan Stanley, whose Jonathan Garner thinks that emerging-market infrastructure spending is likely to grow by about 12% per year over the next decade. That’s an interesting forecast, but it’s basically one number. Charts, … Continue reading →

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