Yesterday’s news from the National Archive that Britain’s ability to defend itself against an attack from the Soviet Union was so diminished in the late 1970s that the prime minister exclaimed: “Heaven help us if there is a war!” spurs me to write a post I’ve been mulling for a while on the armed forces. [...]
Accrued Interest has a great post on the newly expanded TALF. An edited version follows: Fed will loan funds for purchase of recently issued ABS. This [means] ABS issued after January 1, 2009 made up of loans no older than October 2007. The ABS must be rated AAA, and be made up of student loans, [...]
The Washington Post has a nice article on the European Commission’s bullying of the IASB. In October, largely hidden from public view, the International Accounting Standards Board changed the rules so European banks could make their balance sheets look better. The action let the banks rewrite history, picking and choosing among their problem investments to [...]
With apologies to the Dead Kennedys: So you been at the bankFor a year or twoAnd you know you’ve seen it allIn a company carThinkin’ you’ll go farBack east your type don’t crawl Play ethnicky jazzTo parade your snazzOn your five grand stereoBraggin’ that you knowHow the niggers feel coldAnd the slums got so much [...]
I shall be away for a few days from today, so this is the last post for a little while. And, perhaps aptly, it is about the Royal Mail. I have to say first that I cordially loathe the Royal Mail. Deliveries in my area have one of the highest loss rates in the country, [...]
There has been a lot of comment over John Gieve’s comments to the BBC. The programme has not been broadcast yet, so let me confine myself to one point. Gieve apparently says Maybe we need to develop something which bridges that gap and directly addresses the financial cycle and prevents the financial cycle and the [...]
From Long or Short Capital, apropos Madoff: If your investment manager is not charging fees, and is “making it up on volume” (more or less), step back and think about that for a second. If you were in Brazil and a whore said she wanted to give you a free sex because she was making [...]
With apologies to Tina Turner and Mark Knopfler… All the men come in these placesAnd the men are all the sameYou don’t look at their facesAnd you don’t ask their namesYou don’t think of them as humanYou don’t think of them at allYou keep your mind on the moneyKeeping your eyes on the hall I’m [...]
I almost fell off my chair laughing when I read this. Which is not a very sober response to a very sensible proposal: Credit Suisse is going to use $5 Billion of Illiquid Assets to pay Bonuses. As Bloomberg reports: The bank will use leveraged loans and commercial mortgage- backed debt, … to fund executive [...]
MTM means for course `mark to me’. It appears that AIG has determined the most reliable source of fair values for some transactions is — itself. Think of a number. Wow, the number I just thought of was … the number I was thinking of. I must be right. I exaggerate of course. Let Bloomberg [...]
A 4% return in 5 days? That will do me. The short dollar position is off. I still think it is a great long term trade idea and it will go a lot further, eventually, but I don’t want to push my luck.
FT alphaville suggests hugging a hedgie. I beg to disagree with most of their reasons. Let’s go one by one. 1) They provide liquidity. More liquidity equals less market volatility. Nope. The hedgies are often close to one way. They provide liquidity when we don’t need it, as bubbles inflate, but they all rush for [...]
Jeff Frankels has a nice picture on his blog. I like it a lot, but I think it is slightly at error, so here’s my version, a slight modification of Jeff’s original: (Click for a larger version.)
From the FT: BAA, the airports operator, should be broken up and forced to sell three of its seven UK airports, Gatwick, Stansted and Edinburgh, the competition watchdog said on Wednesday. God knows the lot of the blase international traveller is a hard one these days, so any smidgeon of comfort is welcome.
A deeply scary event for the capital instrument market occurred today. Deutsche did not exercise a call on a lower Tier 2 instrument, the 3.875% sub notes of 2004/2014. From their press release: Deutsche Bank has decided not to exercise its early redemption option to call the Notes at par because replacement costs would be [...]
Bloomberg reports: Credit-default swap clearing would become mandatory under legislation slated to be introduced next month by House of Representatives Agriculture Committee Chairman Collin Peterson. Not to be outdone, Peterson’s counterpart in Congress, Senate Agriculture Committee Chairman Tom Harkin, a Democrat from Iowa, last month introduced legislation that would force all over-the-counter trades including credit-default [...]
BBC Radio 4′s Milton Jones maintains that famous chef Heston Blumenthal is actually one of a band of brothers, all chefs, and all named after motorway service stations. If you like Heston’s smoked bacon-and-egg ice cream, you should try South Mimms’ kedgeree sorbet. The most talented brother is in fact Burton-in-Kendal Blumenthal, but little has [...]
I was pondering stores of value the other day. Like many, I am more worried about deflation than inflation, and that make identification of stores of value more difficult. Let’s start with what does not work. Property, clearly, isn’t a good idea. (I might make an exception for agricultural land in an unfashionable part of [...]
The Epicurean Dealmaker has a post about risk and uncertainty. He makes some good points, and I want to expand on one of them, that is the respect we should have for the random nature of the markets. Think about it like this. Mostly in finance we assume that we have the equivalent of a [...]
From Bloomberg: XL Capital Ltd., the biggest Bermuda- based insurer by assets, is seeking a buyer after reporting investment losses larger than its market value, four people with knowledge of the matter said. Big oops. I could be mean about actuaries. I could be mean about monoline-type business models. But for now I just want [...]
FT alphaville answers very. This graphic (from Deutsche Bank) depicts two of the first WBS deals in the UK, both on pubs. The red shows the total debt of the companies; the grey, the business value. Can’t see the grey? That’s because the red is almost exactly the same size…
It suddenly occurred to me this morning that you can, theoretically, hedge the cost of procyclicality. Suppose your credit risk capital requirements in good times are EUR 10B, and they rise to EUR 13B in a crisis. This is roughly right for a large bank: a Deutsche bank study showed between 30 and 80% increases [...]
FT alphaville has a post on the DMO at the tail end of last week, setting out the auction catalogue for the next quarter and setting out progress to date. It includes this summary of the year so far: This squares with my understanding that the DMO has a policy to keep index linked issuance [...]
A moment searching reveals numerous companies who will help you with a persistent technology problem – accessing data written using technology that is now out-of-date or hard to find. A great example of this was the BBC Doomsday project – unlike the paper (well, vellum) based original, this was difficult to read a mere 19 [...]
Because then I will have one fewer dreadful, customer-unfriendly, delay-ridden airline to ignore when booking travel. The rational for loathing British Iberian is easy: it saves time.
Bloomberg has a nice article on one of my favourite pieces of actuarial insanity, guaranteed annuity contracts. The basic story is that life insurance companies wrote long-dated equity index and basket puts in size and didn’t price them properly, because their actuaries didn’t understand derivatives. With the recent market falls, they are beginning to see [...]
Or, why you can’t have it and eat it. Information Arbitrage is wonderfully splenetic about bailouts: The U.S. taxpayers saved Citigroup’s life, and for that we may get up to 8% of the company. THAT is called a “punitive program” in Hank’s parlance – punitive for the U.S. taxpayer. In my world when you save [...]
Some people recently seem confused by the yield of some inflation linked bonds. Here’s the scoop. 1. Some, but not all, inflation linked bonds are floored at zero inflation on principal. That is, you cannot get less than the face value back. TIPS, for instance, have this feature. (2. There is a more extreme form [...]
A more or less parenthetical remark by Meredith Whitney (quoted in the FT) resonated with me. The note from Oppenheimer included a number of recommendations: here is the third: Delay the introduction of accounting rule FAS 140 until 2011 or 2012. These moves to bring off-balance-sheet assets back on balance sheet for the sake of [...]
From Long or Short Capital: We are at, or past, Peak Roubini Go and read the whole post: it’s funny.