Author Archives: Felix

Awaiting the Lehman CDS Auction

Posted on October 7, 2008 by Felix

Here’s an interesting theory: the reason that bank lending has ground to a halt is that everybody’s waiting until the results of the Lehman CDS auction, which is currently scheduled for October 10. "Banks are hoarding cash," says Elizabeth MacDonald, … Continue reading →

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TARP for CP

Posted on October 7, 2008 by Felix

Hey, the Fed has a new acronym! It’s called the CPFF (commercial paper funding facility) and it’s basically the TARP, only instead of buying toxic mortgage-backed securities, the government is buying commercial paper. The new facility is backstopped by the … Continue reading →

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Extra Credit, Monday Edition

Posted on October 7, 2008 by Felix

Carry Trade Bloodbath: AUD/JPY The European collective response: "Europe as a whole lacks a safe asset as focal, liquid, and available as T-Bills and now that is becoming a problem." Signs Of Panic: CNBC Talking Heads Multiplying Beyond Reason: The … Continue reading →

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Five Investment Principles

Posted on October 7, 2008 by Felix

There’s no rush. If an asset is cheap today, it’ll be cheap tomorrow. Think before you act. If an investment causes worry or stress, don’t make that investment. You should be happy with your investments. Your gut is a good … Continue reading →

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Bernanke’s in Charge of the Special Sauce

Posted on October 6, 2008 by Felix

Analogy of the day comes from Mohamed El-Erian, who likens the credit markets to a drive-thru burger joint: “Imagine yourself at the drive-thru ordering a Big Mac. At one window you order and pay, at the other – 20 feet … Continue reading →

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The Duplicitous Sheila Bair

Posted on October 6, 2008 by Felix

After Wachovia agreed to be bought by Wells Fargo on Friday, the FDIC’s Sheila Bair put out a press release saying that her agency "stands behind its previously announced agreement with Citigroup". Except, it wasn’t quite as simple as that. … Continue reading →

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Why I’m Not Buying the Financials

Posted on October 6, 2008 by Felix

At 10am this morning, Evan Newmark stuck his neck out, with a blog entry entitled "Why I’m Buying the Financials". They were spiralling downwards nastily at the time, but obviously the piece had been written long before the market opened. … Continue reading →

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Stocks: Are Retail Investors Buying?

Posted on October 6, 2008 by Felix

For many years, whenever any global economy threatened to run out of steam, the US consumer would step in to save the day. Now, it seems, the US consumer is tapped out — at least when it comes to personal … Continue reading →

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Topsy-Turvy Datapoint of the Day, Fannie Mae CDS Edition

Posted on October 6, 2008 by Felix

Reuters reports on the results of the Frannie CDS auction: Protection sellers on the companies’ subordinated debt were the biggest winners, with contracts on Fannie Mae’s subordinated debt recovering 99.9 percent of the sum insured… Credit default swaps on the … Continue reading →

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The Icelandic Response to Crisis

Posted on October 6, 2008 by Felix

If you’re looking for a sensible and coherent response to a major crisis, you could do a lot worse today than look to Iceland. The country’s current currency crisis happened because it’s so small. But the solution, too, is something … Continue reading →

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Where is Citi’s M&A Expertise?

Posted on October 6, 2008 by Felix

Bill Ackman made an interesting point at the Value Investing Congress today: Citi announced its deal with Wachovia on Monday September 29, at which point both boards had signed off on it. Given that all the specifics were in place, … Continue reading →

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Global Cardiac Arrest

Posted on October 6, 2008 by Felix

John Burbank of Passport Capital appeared at the Value Investing Congress this morning. I’m getting inured to scary prognoses at this point, but he managed to scare me by saying that GE, which is having difficulty rolling over its paper, … Continue reading →

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The Crisis Goes Global

Posted on October 6, 2008 by Felix

Europe’s woes are clearly the key driver for the big slump in global stock markets today: the credit crunch has moved decisively across the Atlantic, and has engulfed the other great home of leverage. But the biggest losers of all … Continue reading →

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Wachovia: Getting Messy

Posted on October 6, 2008 by Felix

The fight over Wachovia is getting messy. Court judgments are getting overruled; obscure provisions in the bailout legislation are taking on a crucial importance; the Fed is acting like King Solomon, splitting the baby between the West Coast and the … Continue reading →

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Lehman’s Lies

Posted on October 6, 2008 by Felix

The WSJ has a fantastic piece of reporting about Lehman’s failure this morning, which explains something I hadn’t understood until now. Yes, Lehman’s bankruptcy caused the credit crisis to get much worse. But the mechanism might well have been Lehman’s … Continue reading →

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Extra Credit, Sunday Edition

Posted on October 5, 2008 by Felix

Dear Investor: Dreadful returns from hedge funds. Agency’s ’04 Rule Let Banks Pile Up New Debt: Good narrative reporting from Stephen Labaton. The Economist’s poll of economists: They’re overwhelmingly pro-Obama. A Proposal for Money Market Funds, and More: I like … Continue reading →

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How Much Will a Wells-Wachovia Deal Cost Taxpayers?

Posted on October 5, 2008 by Felix

Anybody following the fight between Citi and Wells Fargo has to read Binyamin Appelbaum’s front-page piece in the Washington Post on the tax assumptions behind the Wells Fargo offer. In touting the deal, Wells Fargo executives said they did not … Continue reading →

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Blogonomics: Gawker Kills Pay-Per-Pageview

Posted on October 5, 2008 by Felix

A couple of interesting developments in the world of blogonomics: First, Gawker’s Nick Denton has, at least for the time being, killed his pay-per-pageview model. It’s predicated on the idea that advertising revenues will rise with pageviews, but the outlook … Continue reading →

Posted in blogonomics | 1 Comment

Extra Credit, Friday Edition

Posted on October 4, 2008 by Felix

Schwarzenegger to U.S.: State may need $7-billion loan Things that make you go "eww": Trichet’s unfortunate choice of words. Manhattan real estate prices headed downward

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Iceland: When Too Big To Fail Becomes Too Big To Rescue

Posted on October 3, 2008 by Felix

We know that credit ratings agencies made enormous errors over the past few years when it came to rating structured products. And of course it’s never easy to rate leveraged institutions, like banks, which are susceptible to runs. But what … Continue reading →

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So Much for the Bailout

Posted on October 3, 2008 by Felix

On Monday morning, it looked as though Congress was going to pass the bailout bill, and the S&P 500 opened at 1,204. Here we are on Friday afternoon, and Congress has indeed passed the bailout bill; the S&P closed the … Continue reading →

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Citi Examines its Carrots and Sticks

Posted on October 3, 2008 by Felix

I just got off the phone with Carl Tobias, a professor at Richmond School of Law; I asked him whether the exclusivity agreement between Citigroup and Wachovia was worth the paper it was written on. His take was that it’s … Continue reading →

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How Have Credit Unions Survived the Crisis?

Posted on October 3, 2008 by Felix

John Gapper has post up about "the enduring financial advantages of mutuality", talking about insurers, investment banks, and British building societies. The ones which went public got an immediate windfall upside, but also a longer-term downside: One effect was that … Continue reading →

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The Citi Exclusivity Agreement

Posted on October 3, 2008 by Felix

Here is the exclusivity agreement upon which Citigroup is placing so many of its hopes; it was signed by executives from both Citi and Wachovia. If it holds up in court, Citi might just be able to walk away with … Continue reading →

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How Banks Hedge Counterparty Risk

Posted on October 3, 2008 by Felix

Here’s the long post I promised yesterday on hedging counterparty risk. It’s by someone who wishes to remain anonymous, but who used to do this for a living at a very large bank. It’s also incredibly wonky, even without a … Continue reading →

Posted in banking, derivatives | 7 Comments