December 17, 2008

Japan’s central bank kept its main rate at zero from 2001 to 2006 while flooding the banking system with extra cash to encourage lending, spur growth and overcome deflation. The abundant funds failed to prompt lending by commercial banks, which expanded their reserves at the central bank almost nine times by early 2004.

The senior central bank official said the Fed’s policy differs from Japan’s approach by focusing on purchases of short- term debt and other assets in constrained markets rather than on adding cash to the banking system.

The Fed has enlarged bank reserves, supported issuance of commercial paper and provided liquidity to government bond dealers. It is also swapping dollars with the European Central Bank and its other counterparts to supply banks in other countries.
The central bank is trying to lower mortgage rates by purchasing up to $100 billion of debt issued by housing-finance providers Fannie Mae and Freddie Mac and $500 billion of mortgage-backed securities guaranteed by the companies.

The moves have swelled the Fed’s balance sheet to $2.26 trillion from $868 billion in July 2007. That’s in addition to the $700 billion Troubled Asset Relief Program, which the U.S. Treasury has used since October to channel about $335 billion of capital injections into banks and other financial companies.
Still, the economy has crumbled, with employers cutting 533,000 jobs from payrolls in November for a total loss this year of 1.9 million, which more than erases the 2007 gain of 1.1 million.
Weaker dollar has moved money to the tech trade, we will be getting downward pressure on the dollar,

The firm forecasts a 4.2 percent annual contraction rate in the first quarter, returning to no growth in the second quarter and a 2.3 percent expansion rate in the second half of 2009. The federal funds target rate has weakened as a monetary policy tool because the Fed’s flood of funds has caused the average daily rate to trade below the policy goal every day since Oct. 10.
The gap between the target and the effective rate, or average daily market rate, has averaged about a half point since Sept. 12. The gap averaged just above zero from the start of this year through Sept. 2.

Housing starts fell almost 19% to an annual rate of 625,000 units, a level not seen since records started being kept in the 1950s. Not to be outdone, CPI fell 1.7% last month, which was the most negative showing ever since our nation’s bureaucrats began consistently tracking it back in 1947.

Since the lower boundary of said range is zero, the Fed felt compelled to announce its readiness to undertake further measures. Some will describe these current and future actions as “quantitative easing”, but a better description might be the poker analogy proffered on Bloomberg Television this afternoon: “The Fed is All In”.

Accel Partners, the Palo Alto, Calif., venture capital firm behind companies such as Facebook, Glam Media and MetroPCS, announced Thursday that it has raised two new funds for a total of $1 billion.

http://www.etfconnect.com/

Comments on the commercial real estate state for banks

http://seekingalpha.com/article/111073-goldman-on-commercial-real-estate?source=email

adding quantities of money into diff places “quantitative easing”


Market Folly – hedge fund tracking

http://www.marketfolly.com/2008/11/hedge-fund-tracking-series-3rd-quarter.html

hedge fund talk
http://seekingalpha.com/article/111079-hedge-fund-tracking-shumway-capital-partners-chris-shumway-q3-2008?source=email

December 16, 2008

U.S. government bonds returned 12.7 percent this year, the most since they gained 13.4 percent in 2000, according to Merrill Lynch & Co.’s U.S. Treasury Master index.

“Over the next few quarters the Federal Reserve will purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and it stands ready to expand its purchases of agency debt and mortgage-backed securities as conditions warrant,” the Fed said in the statement.
The members of the committee are also evaluating the potential benefits of purchasing longer-term Treasury securities and will also implement the Term Asset-Backed Securities Loan Facility to extend credit to households and small businesses.
On the inflation front, the FOMC said that inflationary pressures have “diminished appreciably,” due to declines in the cost of energy, other commodities and the weaker prospects for economic activity.

The committee said it expects inflation to moderate further in coming quarters.
In another action, the Federal Reserve Board of Governors unanimously cut the discount rate by 0.75% points to 0.50%. The discount rate applies to banks borrowing from the Federal Reserve, while the federal funds rate refers to the interest that banks charge when borrowing from each other.

Goldman Sachs swung to a fiscal fourth-quarter net loss on slumping results at its trading and principal investments business, the banking giant's first quarterly loss since going public a decade ago.

Consumer prices declined 1.7% last month, as prices excluding food and energy were unchanged, suggesting the slumping economy are rapidly taking pressure off inflation. Housing starts fell to a record low.

Other official borrowing rates -- such as rates on 3-month Treasury bills -- also have tumbled to near zero, a level they haven't been near since the 1930s. The trouble for Fed officials is that while official borrowing rates are very low, interest rates for borrowers with even a modicum of risk remain far above levels of a few months ago, which is squeezing the economy.

Yale said it estimates its endowment has fallen 25% since June 30, the latest college to disclose the toll the economic crisis has taken on its finances.

December 11, 2008

It was a dismal year for taking your company public, as Ernst & Young's year-end global IPO report shows. For the year through November:
• 2008: 745 IPOs worldwide, raising $95.3 billion.
• 2007: 1,790 IPOs worldwide, raising $256.9 billion.

That's the lowest total since 1995, and full-year figures are expected to continue the trend. Some 298 IPOs were postponed or withdrawn this year vs. just 167 in 2007.
What action there was in new offerings took place increasingly in Asia (led by China), which outpaced the amount of capital raised in North America this year. New Asian public offerings raised $29.7 billion in 337 IPOs compared to North America's 91 deals worth $27 billion. By size, Visa's IPO was the years largest (and the largest ever at $19.7 billion) but of the top 20, 15 were in emerging markets.
The takeaway here is that going public is an increasingly global phenomenon, and when the world economy takes a hit there aren't really any markets that escape the pain.

Two-thirds of institutional investors surveyed will have no room left to increase their commitments to private equity funds by this time next year.
Investors in private equity funds, known as limited partners, are primarily made up large pension funds, endowments and wealthy individuals. These limited partners typically set targets for a specific percentage of their overall pool of money that is allocated to private equity. That pool, however, has shrunk because of the drastic drop in stocks, bonds and other investments over the last year. (A lot of limited partner capital is also locked up in money-losing hedge funds.)
Since private equity funds are illiquid long-term commitments — cash is typically locked up for 10 years — the percentage allocated to private equity will likely exceed many limited partners’ targets.

A year from now, 28 percent of the limited partners surveyed by Coller Capital expect to exceed their allocation targets. That means they will likely have to sell their interest in private equity funds at a discount on the secondary market to firm’s like Coller.

December 09, 2008

The shortest-dated Treasurys the U.S. government sells caught fire Tuesday, as investors lunging for a place to protect their cash bought up $32 billion in four-week bills at an unprecedented yield of 0% and pushed the yield on the three-month bill briefly below that mark.

The three-month yield fell to between negative 0.1% and 0.2%, according to two traders at separate Wall Street banks. The traders, however, couldn't confirm if trades were executed at these levels. By afternoon trade, the yield moved back into positive territory to 0.04%.

December 08, 2008

Stocks rose around the world, sending the Dow Jones Industrial Average to a one-month high, as President-elect Barack Obama pledged to boost the economy with the biggest public-works spending package since the 1950s.

The Standard & Poor’s 500 Index extended its gain from an 11-year low last month to 21 percent.

Obama’s plan to boost the economy with a “substantial” infrastructure stimulus package triggered a global rally, with the MSCI World Index jumping 5.5 percent.

December 05, 2008

Junk bond peddlers should have taken a vacation in November. That’s because there were no — count ‘em, zero — high-yield corporate bond deals done last month on the entire planet, according to data from Thomson Reuters. That is the worst showing since March 1991, when the market for junk debt, more politely known as high yield, was in ashes.

U.S. companies slashed payrolls last month at the fastest pace in 34 years as the economy headed for its deepest and longest recession since World War II.

Employers cut 533,000 jobs, bringing losses so far this year to 1.91 million, the Labor Department said today in Washington.

November 28, 2007

Has been difficult measuring these companies based on PE multiples. Nobody understands or knows earnings. Use the more appropriaet div discount model.

Treasury buyers now are setting themselves up for significant capital losses.

TIPS are trading at nearly a zero spread to treasuries.

Stock type returns with little or no risk. Corporates, close end bond funds, etc. However equities provide better protection vs inflation.

Div Yld on market was close to 4%

November 26, 2008

No market for IPOs - US Power Generating Company has pulled its planned $500 million initial public offering, citing market conditions in regulatory filing Tuesday.

Cleantech has several factors in its favor, he argues. These include continued concerns about climate change and energy independence, as well as the potential for greater support from the incoming Obama administration. As for oil prices, Mr. Milunovich says that “practical peak oil is real” and predicts that oil prices eventually should move back up.

Asset allocation has been thrown out the window.

November 25, 2008

Private Equity Wine outfits:

What we do know is that the bear market is entering its 14th month and with a peak to trough decline of 52%, is the most severe downturn since the great depression, according to Thomas J. Lee, U.S. equity strategist at J.P.Morgan.

While the magnitude of the declines are the same, the duration of the bear market this time around is 14 months versus an average of 19 months in the past. “One reason to expect a longer duration is simply that we are at the front end of this recession,” he told clients.

Retracements, temporary price reversals that take place within a larger trend, are useful to watch since bear markets typically shed 73% of the points gained in the prior bull market, the strategist said. In the Great Depression, however, the Dow Jones Industrial Average shed 107% of the gains in the prior nine-year bull market.
Applying that figure to today’s market implies 720 for the S&P 500, which Mr. Lee considers the low end of the range. As a result, he recommends buying at that level and selling around 1125.

Many stocks are selling at or near book value. Think about the significance of that for a moment. Equity in the company is valued near what the company could sell its tangible assets (minus liabilities) for in a fire sale today. Companies that have a lot of cash on hand (and little debt) will be in a great position to take advantage of the downturn either by protecting against a slowdown or by buying out competitors without the need for extensive financing.

As you will notice from our asset allocation model we recommend that long-term value investors be bullish right now in this depressed market. As any student of finance will tell you, the return on an investment is inextricably linked to the risk the investor is willing to take on. Clearly, the stock market has plenty of risks associated with it, but its valuation is much less risky now than it was one year ago and the return that one can reasonably expect to make from the equity market is vastly improved over one year ago.

Valuations today are more pessimistic than the Great Depression.

Interbank lending is up and improving.

The Federal Reserve took two new steps to unfreeze credit for homebuyers, consumers and small businesses, committing up to $800 billion.

The central bank will purchase as much as $600 billion in debt issued or backed by government-chartered housing-finance companies. It will also set up a $200 billion program to support consumer and small-business loans, the Fed said in statements today in Washington. The Fed will purchase up to $100 billion in direct debt of Fannie Mae, Freddie Mac and the Federal Home Loan Banks and up to $500 billion of mortgage-backed securities backed by Fannie, Freddie and Ginnie Mae, the statement said.
Aid for Housing - “This action is being taken to reduce the cost and increase the availability of credit for the purchase of houses, which in turn should support housing markets and foster improved conditions in financial markets more generally,” the Fed said. Separately, under the new Term Asset-Backed Securities Loan Facility, the Fed will lend up to $200 billion on a non-recourse basis to holders of AAA rated asset-backed securities backed by “newly and recently originated” loans, such as for education, automobiles, credit cards and loans guaranteed by the Small Business Administration, the Fed said. The Treasury will provide $20 billion of “credit protection” to the Fed in the lending program, using funds from the $700 billion financial-rescue package. The Treasury said in a statement that the facility may expand over time and cover other assets, such as commercial and private residential mortgage- backed debt.

ABS Program - Under the new lending program, known as the TALF, the New York Fed will auction a fixed amount of loans each month for a one-year term. Assets will be held in a special-purpose vehicle to be created by the Fed. The program will stop making new loans on Dec. 31, 2009, unless the Fed Board of Governors extends it.
Lenders providing credit under the TALF “must have agreed to comply with, or already be subject to,” executive- compensation restrictions in the October bailout law, the statement said. The Fed will start buying the direct debt of government- sponsored enterprises -- Fannie, Freddie and a dozen federal home loan banks -- through primary dealers in government debt from next week. The purchases of mortgage-backed securities will be done through asset managers, and officials aim to begin the effort by year-end. Purchases of both types of debt “are expected to take place over several quarters,” the Fed said.

November 24, 2008

That's something that hadn't happened since 1958.
- the dividend yield on the Standard & Poor's 500 stock index touched 3.57% at 1:13 PM Eastern time, exceeding the 3.54% yield on the benchmark Treasury 10-year note, according to Bloomberg News.

mispriced - implies the consumer price index will rise just 0.64% annually for the next 10 years. Indeed, that lack of difference also reflects the low level of expected future inflation, Kass adds. That also is reflected in the so-called TIPS spread (the difference between regular and inflation-indexed notes), which implies the consumer price index will rise just 0.64% annually for the next 10 years. Adds Dominic Constar, interest-rate strategist at Credit Suisse, the convergence of stock and Treasury yields suggests that corporations, including banks, have been slow to cut payouts "as the economy teeters on a deflationary abyss."

The three-month T-bill yields barely above 0%. The one-year note offers less than 1%.
But frazzled Main Street investors shouldn't blindly shadow the supposed "smart money." When the panic trade ends (Friday's markets offered a glimmer of hope), the pros will seek some degree of risk and will pull money out of Treasurys. Treasury prices will move lower, leaving potential capital losses for those who don't flee government paper as fast.

Rough week Nov 17 - 21st:

November 21, 2008

Grand Canyon Education braved the public markets Thursday, becoming the first company since Aug. 7 to go public in the United States. In doing so, it broke the longest drought for initial public offerings of stock in decades.

No companies are expected to go public in the United States by the end of the year, according to Dealogic. It’s a trend that has been especially troubling to the venture capital industry, making it hard for them to cash in on their investments.

Before Grand Canyon, the last public offering on a United States exchange was 104 days ago, when Rackspace Hosting, a San Antonio Web hosting company, took the plunge. Its stock has fallen more than 50 percent since then, despite being priced at the bottom of its expected range, as Grand Canyon was.

Since Rackspace hit the market, 29 initial public offerings have been withdrawn, according to data from Thomson Reuters. With the global markets continuing to take a beating, more companies, both in the United States and abroad, may scrap their plans to ring the opening bell.

The number of U.S. workers filing new claims for unemployment benefits soared again last week to its highest level in 16 years.

Christopher Cox's SEC eliminated the Uptick Rule on July 6th, 2007. Since the rule was done away with, the S&P 500 is down 51%.






If you're looking for signs of stabilization in the credit markets, the high yield market is not a good place to start. Based on data from Merrill Lynch, high yield bonds are yielding nearly 1,800 basis points more than comparable Treasuries. In the last month alone, spreads have risen by more than 200 basis points, and since bottoming in the Summer of 2007 at 241 basis points, they are up 645%. To put this in perspective, with the 10-Year US Treasury now yielding 3.4%, a high-yield borrower would need to pay roughly 21.4% per year to take out a ten-year loan.

November 20, 2008

Release of October PPI showed the largest month-over-month decline on record (-2.8%), which easily beat the prior extreme from October 2001 of -1.6%. With today's Producer Price Index showing costs dropping at a record rate, all comparisons of the current period to the 1970s pretty much go out the window.
Not the point of picking at the bottom, but picking value.

Only one/two bear markets that are now worse than 2008- coming out of the bear in 1932 is one of them.

The following chart shows the value of the S&P 500 from January 1871 through July 2007:










Now, we've got something! Using the logarithmic scale lets us see the true magnitude of the great bear markets for U.S. stocks since 1871. Our table below provides the data for each:





2 Yr Treasuries yielding less than 1%, which has never been seen.

S&P 500 is at 11 yr low.

In the latest 7-Year Asset Class Forecast from Jeremy Grantham and GMO (published October 31 - before the latest leg down in the market), the firm anticipates a 12.2% annual return from U.S. 'high quality' equities with active management, and approximately 11% from international developed markets.

November 17, 2008

Banks and brokerages worldwide have shed almost 160,000 jobs since the subprime mortgage market collapsed last year, sparking a credit crisis

For the first time, Prudential Financial Inc. of Newark, N.J., has cut its shareholder dividend for 2008 - down by about 50% from the dividend paid out in 2007.

The Department of the Treasury’s decision not to use part of the $700 billion Troubled Asset Relief Program to repurchase bad mortgage assets is an improvement on the original plan, he said, noting that it is “extremely hard” to find a mechanism that would work.

All VIX related:

The number of workers who filed for first-time unemployment benefits increased by 32,000 to 516,000 for the one-week period ended Nov. 8 — marking the highest level since the Sept. 11, 2001, terrorist attacks, according to the Department of Labor.
Jobless claims above 400,000 are considered to be a sign of a recession.

November 10, 2008

China government announced a $586 billion, or four trillion yuan, plan to bolster its economy, and as the New York Times points out, that "could also help fight the effects of the global slowdown ... at a time when major infrastructure projects are being put off around the world." The sum "represents about 16% of China's economic output last year, and is roughly equal to the total of all central and local government spending in 2006," The Wall Street Journal adds. "New spending of even half that amount would be substantial next to China's six trillion yuan annual budget for this year."

Compared by some economists to the New Deal enacted by President Franklin Roosevelt some seven decades ago, the Chinese plan would "ease credit restrictions, expand social welfare services and launch an infrastructure spending program that would include the construction of new railways, roads and airports," the Washington Post reports. But it's all the more striking because Chinese officials have insisted for months that the country wasn't suffering the economic tribulations rippling across the rest of an economic world in which China has become such an integral part.

Dinexion – offering ETFs providing 3x leverage

Best way to gather a crowd in DC is to hand out money.

November 07, 2008

Jeremy Grantham (Chairman of GMO) has turned bullish. This guy is a bear man. Stocks are cheap like the 1987 levels.

Investment grade credit is cheap. Spread between investment grade bonds and Treasuries has widened to more than 5% points, a more normal spread would be 1 pt.

Calls sold against an existing stock position is called "overwriting," or "covered call writing." This classic conservative strategy makes sense as options volatilities are high, and many stocks seem stuck fluctuating between well-defined trading ranges. Moreover, the high volatility translates to pricier options, a good thing for the investor who is selling them.

The Chicago Board Options Exchange's Market Volatility Index (VIX) was recently at about 57, a relatively high level that is driving up the call premiums that call sellers are receiving.

Say you own Apple, and want to increase the yield of the stock, but do not necessarily want to sell the stock, at least not at the current price. Selling calls helps to generate some extra money.

With the stock at about $99, you could sell the November 110 calls for $2.40, or the November 115 calls for $1.33. If the stock price pushes past $110 or $115 before, or when the stock expires Nov. 21, an investor has to sell the stock. If the stock is not "called away" because the price never exceeded the stock price, investors keep the money for selling the premium.

The downside to selling covered calls is if Apple stock exceeds expectations. The call seller is left with some income, but he has conceded the upside to the holder of the call.

Many investors like to sell options when they are richly priced because they think the volatility will decline. This is true in normal markets, but be advised that the fourth quarter of 2008 is anything but a normal market. In fact, the historical volatility of many options is higher than implied volatility. When selling options, you want volatility to decrease, not increase. The high historic volatility of many options underscores the heightened volatility risk.

Capital Projects / Spur Infrastructure: Pennsylvania voters approved a $400 million bond issue for improvements to water infrastructure and waterways across the state. The referendum includes a variety of potential projects, including sewage overflow mitigation, new construction and upgrades of water and wastewater treatment facilities and sewer and drinking water line repair and replacement.
Potential beneficiaries could include Mueller Water Products (MWA) and Northwest Pipe (NWPX) for delivery of pipe to replace existing lines and use in treatment facilities, and Layne Christensen (LAYN) for construction of new treatment facilities and upgrades. We anticipate projects will be spread over several years.

October 30, 2008

chart depicting the various stages of a bear market.

October 29, 2008

Remember that an entire generation of investing was lost in the 70’s – is it happening now?

10/28/08 800+ pt gain in Dow. U.S. stocks surged more than 10 percent on Tuesday, capping a worldwide rally in equity markets, as investors snapped up shares that had plunged during the worst October on record, and the yen posted its biggest decline against the dollar in more than 30 years. The yen's biggest fall against the greenback since 1974.The Dow industrials and the S&P 500 had their second-biggest point gains after the record rally two weeks ago. A big catalyst for the late-day surge was a huge drop in the Japanese yen after a news report that the Bank of Japan may cut interest rates later this week. A sudden strengthening of the yen during the past week had been destabilizing stock markets around the world, and Tuesday's reversal of that trend was greeted with relief by investors.

- Japanese newspaper report saying the Bank of Japan is considering an interest rate cut sparked the dollar-denominated Nikkei 225 futures index NKc1 to jump 14 percent and hit an upward limit threshold, and helped ignite the U.S. rally.
- The yen's recent rally forced an unwinding of the so-called "carry trade" -- a phenomenon of Japan's low interest rates, in which investors borrowed yen to finance investments in higher-yielding assets, such as U.S. stocks. The yen has leapt about 20 percent on a trade-weighted basis this month alone as investors unwound carry trades, a phenomenon of Japan's low interest rates, in which they borrowed yen to finance investments in higher-yielding assets. The yen's biggest fall against the greenback since 1974.

October 28, 2008

Dollar strengthens / dollar has been on a run - us imports become cheaper , us exports more expensive, foreign profits of US companies decline.

Many companies having difficulty accessing the capital markets to finance these projects that all the investment banks were funding - infrastructure, in particular, has been hard hit. Major projects are being delayed indefinitely.

October 22, 2008

Rather be late to party than early, can’t buy on dips

My favorite - Argentina is trying to nationalize its pension fund system

Info for CDO market, etc at Markit

Interesting Blogs:
Calafia Beach Pundit

The Ten Best Financial Blogs:
10. 24/7 Wall Street
9. The Big Picture
8. Dealbreaker
7. Footnoted.org
6. Nouriel Roubini’s Global EconoMonitor
5. TraderFeed
4. Wallstrip
3. Paul Kedrosky's Infectious Greed

October 20, 2008

As heard on CNBC - "Always have your enemies underestimate your weaknesses and have your friends overestimate your strengths" – quote from the Godfather

"If you want a helping hand look down at end of your arm."

"Tighter than bark on a tree" - j hamrick

Mortgages are linked to LIBOR

October 13, 2008

Dow's fifth largest up move in history- approx. 11%

Look at spread of AAA corp over BB corp to assess uncertainty in credit markets.
- peak was spread of 148 and now it is 181 bps

Forex Market Center- open/close

October 07, 2008

The Dow industrials fell below 10000 and European stocks fell to 20-year lows, a stark sign that the crisis may be outpacing policy makers' ability to contain it.

In a bold move, the Federal Reserve Board today announced that it will buy large amounts of short-term debt in an effort to liquefy parched credit markets.

The Fed's new commercial paper funding facility will provide a vehicle that will purchase three-month unsecured and asset-backed commercial paper directly from eligible issuers.

The Department of the Treasury will make a special deposit at the Federal Reserve Bank of New York to back the facility.

The Fed said that the commercial paper market has been under “considerable strain” in recent weeks as money market mutual funds and investors have become reluctant to purchase commercial paper, especially at longer-dated maturities.
"By eliminating much of the risk that eligible issuers will not be able to repay investors by rolling over their maturing commercial paper obligations, this facility should encourage investors to once again engage in term lending in the commercial paper market," the Fed said in a statement.

Bellatore Financial Inc. of San Jose, Calif., is buying Capital Allocation and Management Inc. of Greenwood Village, Colo., and Advisor Partners LLC of San Francisco. Capital Allocation provides portfolio management and consulting services and oversees $365 million in assets. Advisor Partners is a separate accounts manager with $350 million in assets. Al Steele, Bellatore’s chief executive, said Advisor Partners gives Bellatore a separately managed account platform and Capital Allocation adds relationships with more than 120 independent financial advisers.
Advisor Partners will continue to run as a separate business with its current staff, said Dennis Clark, co-founder of Advisor Partners. “Bellatore will provide us with greater resources for growth,” Mr. Clark said. Advisor Partners chairman Andrew Rudd will join Bellatore's investment committee, Mr. Steele said.

October 01, 2008

The difference between what banks and the U.S. Treasury pay to borrow money for three months, the so-called TED spread, widened 21 basis points to 336 basis points today after breaching 350 basis points for the second time yesterday. The spread was 110 basis points a month ago.

Duke has $650 million in bonds coming due this year, $442 million scheduled to mature next year and $500 million in 2010, according to data compiled by Bloomberg. Chief Financial Officer David Hauser said Duke is drawing from its credit agreement because it wasn't clear whether it would be able to secure more than $1 billion in new financing this year as planned.

Circuit City, the second-largest U.S. consumer-electronics company, hired turnaround firm FTI Consulting Inc. as an adviser, according to two people familiar with the appointment. The interest rate on Circuit City's long-term debt is tied to Libor, which gained about 46 percent. That may increase Circuit City's quarterly interest payment by at least $2 million, according to Bloomberg data.

Spansion's interest-coverage ratio, or earnings divided by interest expense, was negative 2.44 at the end of the second quarter. The lower the ratio, the less the company may have available to make interest payments.

John James, who runs the Chicago-based firm with $25 million of assets, didn't buy Lehman stock or debt. Instead, his potentially fatal mistake was to rely on the bank's prime brokerage in London, a unit that provides loans, clears trades and handles administrative chores for hedge funds. He's one of dozens of investment managers whose Lehman prime-brokerage accounts were frozen when the company filed for protection from creditors on Sept. 15.

The average fund is down 10 percent for the year, as of last Friday, according to Hedge Fund Research, and much of those losses hit in September.

Fair Value Clarification: Last night the SEC and FASB released a joint statement on the use of fair value accounting in today's turbulent environment (CLICK HERE ), just in time for 3Q earnings season. The release provided guidance on common questions surrounding the use of Fair Value Accounting against securities to which a liquid market no longer exists and where the ability to find a "fair" mark is no longer possible. The primary theme here is that companies must exercise judgment, while providing significant transparency and disclosure. In recent weeks we have discussed the difficulties in valuing specifically trust preferred CDOs held as investments by some banks, who because of these holdings have come under severe scrutiny by the investment community. We applaud the guidance provided by the SEC and FASB in confirming that the "fire sale" prices available should not be used to value performing securities. In addition, each investor in these securities must value the performance and expectation of their specific investment. This confirms our assessment that valuation measures of these CDO investments across firms are not comparable as all CDO pools are different and will have varying degrees of performance.

September 30, 2008

In 2004, Goldman Sachs, along with 4 other brokers, received a waiver of the net capitalization rules, allowing these firms to dramatically exceed the 12-to-1 leverage rules.

WaMu's collapse heightened concern about the $122 billion of option ARMs sold by Wachovia, the No. 1 provider of such loans, according to Sean Ryan, an analyst at Sterne Agee & Leach Inc. in New York.

``The liquidity crunch is pushing a lot of banks to basically face credit issues faster than they otherwise might have,'' Ryan said. ``When it became obvious that Wachovia would have a difficult time justifying the value of their option ARMs, it became clear that their tangible equity could potentially be wiped out.''

But liquidity is based on the assumption that you can roll over your debts and when the fixed- income markets are closed, then your hand is forced.''

Sept. 30 (Bloomberg) -- The cost of borrowing in dollars overnight rose the most on record after the U.S. Congress rejected a $700 billion bank-rescue plan, putting an unprecedented squeeze on the global financial system.

The London interbank offered rate, or Libor, that banks charge each other for such loans climbed 431 basis points to an all-time high of 6.88 percent today, the British Bankers' Association said. The euro interbank offered rate, or Euribor, for one-month loans jumped to a record 5.05 percent, the European Banking Federation said. The Libor-OIS spread, a gauge of the scarcity of cash, also increased to an all-time high.

``This is unheard of, the money markets should be the engine driving the financial system but they have broken down,'' said Kornelius Purps, a fixed-income strategist in Munich for UniCredit Markets and Investment Banking, a unit of Italy's largest lender. ``Any institution that hasn't completed its 2008 funding needs by now is going to be in very serious trouble. More banks are going to need to be bailed out.''

Money-market rates climbed even after the Federal Reserve yesterday more than doubled the size of its dollar-swap line with foreign central banks to $620 billion. In Europe, banks borrowed dollars from the ECB at almost six times the Fed's benchmark interest rate today.

Commercial Paper
Libor, set by 16 banks including Citigroup Inc. and UBS AG in a daily survey by the BBA, is used to calculate rates on $360 trillion of financial products worldwide, from credit derivatives to home loans and company bonds.

As money-market rates rise, banks charge higher interest on loans to companies and consumers. U.S. securities firms and lenders alone have a record $871 billion of bonds maturing through 2009, according to JPMorgan Chase & Co.

Yields on overnight U.S. commercial paper jumped 171 basis points today to an eight-month high of 3.95 percent, according to data compiled by Bloomberg. Average rates on paper backed by assets such as credit cards and auto loans rose 229 basis points to 6.5 percent, the highest since 2001. Companies sell commercial paper to help pay for day-to-day expenses such as salaries and rent.

Funding constraints are being exacerbated as financial companies try to settle trades and buttress balance sheets over the quarter-end, balking at lending for more than a day.

September 29, 2008

Liquidity injection – $630B worldwide / $200B in US today

Raymond James to become holding company, as well.

On Monday, Citi bounced back in a shocking new role — financial savior — a status underscored by its move Monday to acquire Wachovia Corp.’s 3,300 branches.

The transaction was brokered by the federal government because it feared Wachovia would soon follow in the footsteps of Washington Mutual Inc., which failed last week.

The deal more than quadruples the size of Citi’s U.S. branch network and gives it another $500 billion in deposits, bringing Citi’s global total to $1.3 trillion.

For all of that Citi is paying precious little — $1 a share, just $2.16 billion in stock to Wachovia shareholders. The price reflects a 90% discount over where Wachovia’s shares closed on Friday. On the other hand Citi will take over $53 billion in Wachovia’s debt and will immediately write-off $30 billion in Wachovia’s mortgage-related assets upon closing the deal.

In addition, Citi is on the hook for another $12 billion of possible write-downs from Wachovia’s mortgage portfolio. Any losses beyond that, however, will be covered by the Federal Deposit Insurance Corp.

That could turn out to be a hefty burden for the government given that Wachovia’s $312 billion portfolio of mortgage-related assets is widely considered one of the sickest in banking.

The problem centers on Wachovia’s heavy exposure to ailing housing markets in Florida and California and its heavy amount of so-called Option ARM loans.

In exchange for protecting Citi from those possible future losses, the FDIC received $12 billion in preferred stock and warrants from the bank.

In addition to selling a stake to government, Citi said it is raising another $10 billion in fresh capital to cover potential losses by selling common stock. It will also cut its quarterly dividend in half to conserve cash, to 16 cents per share.

This marks the second time this year that Citi has slashed its dividend, and the latest capital-injections brings the total raised by Citi to over $70 billion this year.

The bank said it expects close fewer than 5% of its new branches, yet expects to generate cost savings of $2 billion. That number is equal to about 10% of Wachovia’s non-interest expenses last year, suggesting that there will be heavy job losses as a result of this merger.

Citi is not acquiring Wachovia’s A.G. Edwards retail brokerage unit or the Evergreen money management business. Presumably those assets will soon be put for auction or spun off to shareholders.

Commercial Loan Pricing Improves - Good Example From BBT: In case you missed it yesterday, BBT-BB&T Corp. closed a new facility with JOE-St. Joe Co. for $100 million at pricing of LIBOR+75 to LIBOR+175 depending on the level of total borrowing relative to asset values. This relationship was moved from WB-Wachovia and along the way the size of the credit line was cut in half and the pricing virtually doubled (i.e., the original terms with JOE disclosed in 2005 were $200 million at LIBOR+40 to LIBOR+100). We think this is an excellent example of how banks are able to win far better terms today than in prior years. While we hear anecdotal stories that pricing is improving on commercial credits, investors can point to this example as direct evidence.

September 23, 2008

Follow closely the TED Spread - TED spread

Initially, the TED spread was the difference between the interest rate for the three month U.S. Treasuries contract and three month Eurodollars contract as represented by the London Inter Bank Offered Rate (LIBOR). However, since the Chicago Mercantile Exchange dropped the T-bill futures, the TED spread is now calculated as the difference between the three month T-bill interest rate and three month LIBOR. The TED spread is a measure of liquidity and shows the degree to which banks are willing to lend money to one another.

The TED spread can be used as an indicator of credit risk. This is because U.S. T-bills are considered risk free while the LIBOR rate reflects the credit risk of lending to commercial banks. As the TED spread increases, the risk of default (also known as counterparty risk) is considered to be increasing, and investors will have a preference for safe investments. As the spread decreases, the risk of default is considered to be decreasing.[1]

TED is the acronym of T-Bill and ED, the ticker symbol for the Eurodollar futures contract. The size of the spread is usually denominated in basis points (bps), e.g. when T-Bills trade at 5.10% and ED trades at 5.50%, the TED spread is said to trade at 40bps. The value of the TED spread fluctuates over time but is often between 10 and 50 basis points (0.1% and 0.5%). A rising TED spread often foretells a downturn in the U.S. stock market as liquidity is withdrawn.

During 2007, the credit crunch, which many believe was caused by the U.S. subprime mortgage securities meltdown, ballooned the TED spread to a region of 150-200bps. On September 17, 2008, the record set after the Black Monday crash of 1987 was broken as the TED spread exceeded 300bps

August 25, 2008

As always- Fixed-annuity sales zoom in second quarter. Sales hit an estimated $24.6 billion during the second quarter, up 54.1% from the second quarter of 2007.

August 01, 2008

Bloomberg: China is restricting approvals for share sales to arrest a decline in the world's worst-performing major stock market, two people familiar with the matter said. The China Securities Regulatory Commission is delaying the issuance of written approval documents, the final regulatory stage, to companies preparing initial public offerings, said the people.

July 29, 2008

Lone Star Funds' agreement to buy the bulk of Merrill's mortgage securities, once valued at $31 billion, for 22 cents on the dollar was the latest audacious deal by the Dallas-based private equity firm.

July 18, 2008

Perella Weinberg Partners' Xerion hedge fund rose 24 per cent this year, helped by wagers that the value of investment-grade bonds of financial-services firms would fall, according to a letter sent to investors. The USD837 million fund, which invests in the shares and debt of troubled companies, has far outstripped competitors, which have lost 1.6 percent on average in the first half of 2008, according to Chicago-based Hedge Fund Research Inc.

Brevan Howard Asset Management, one of Europe's biggest hedge fund managers with USD24 billion under management, has established multiyear incentive structures, according to a report in the the Wall Street Journal. In a bid to reduce undue risk-taking among traders, who are tempted by hopes of a bonus boost, Brevan Howard will deliver annual payouts in segments over a multiyear span— with the right to hold back some of the bonus in case of underperformance.

June 10, 2008

Many hedge funds had a rough June, pummeled by falling equity and credit markets. But not Clarium Capital, the USD6.4 billion hedge fund founded by PayPal co-founder Peter Thiel. The San Francisco-based firm posted gains of 16 per cent in June, giving it year-to-date returns of a staggering 57.9 per cent, according to a note the firm sent to investors this week. It is unclear from the note how Clarium generated such outsized returns.

July 09, 2008

Today, our Investor Intelligence Sentiment Indicator which measures the percent of investment letters that are bullish, hit a 14-year low of 36.8, rivaled only by the reading during the 1994 bond market crash and showing greater bearishness than the October 2002 bear market low, the 9-11 terrorist attacks, or the Asian, LTCM, or Russian Default Crisis. These extreme bearish readings have in the past been associated with excellent buying opportunities.

July 08, 2008

Amid an internal investigation to determine the cause of a modeling error that affected ratings of around $1 billion in credit products, the head of Moody’s Investors Service’s global structured finance business, Noel Kirnon, has been fired.
The unit of New York-based Moody’s Corp. announced yesterday that Mr. Kirnon’s position as head of structured finance will be filled by chief credit officer Andrew Kimball until a permanent replacement is found.

As hedge funds begin to behave increasingly like equities markets, investors have begun to seek out niche hedge-fund strategies that are less likely to mirror share-market moves. It is important for hedge funds' reputation that they not echo equity markets too closely. Their managers typically levy a 2% management fee and 20% performance fee on their investors on the expectation that they are delivering something different from traditional equity funds, which usually levy a 1.5% management fee and no performance-linked charges.

US credit manager Aladdin Capital are each raising USD3 billion (EUR1.9 billion) to back small hedge fund managers, eFinancial News reports. Lehman Brothers aims to raise USD3 billion to USD5 billion for a fund to buy strategic minority stakes in hedge fund managers, according to sources at the bank. The fund, which has been called Omega, plans to invest in up to 12 managers, and follows a series of investments by Lehman, including stakes in GLG Partners, DE Shaw, and BlueBay Asset Management. Lehman declined to comment.

June 27, 2008

More trouble at Investment Banks - Today, revenue per employee is near where it was in 2004. But headcount remains much higher. So how severe would job cuts have to be if staffing was to be in line with recent profit with recent levels of profitability?
Portales Partners, an independent research firm in New York, tried to find out. It examined the growth in revenue and headcount among the major investment banks between 2004 and their most recent quarter.

If revenue reverts back to its 2004 levels, Portales concluded, brokers may need to reduce their staffing levels by 20 percent to maintain recent levels of profitability. But despite the massive losses, Portales estimates that headcount has only fallen in the low single digits from its peak.

Ten years. Two contenders. One winner of a USD1 million prize. On one side, legendary investor Warren Buffett; on the other, fund of hedge funds operator Protege Partners. The battle? Whose net returns will be higher over the next decade: five of the world's most successful hedge funds ... or the passive Vanguard 500 Index Fund? If it's not obvious by now ...

Buffett believes the index fund will win. It might seem shocking that he'd put so little confidence in such bright investors, but a judgment of investing prowess isn't the reason behind Buffett's bearish bet. Instead, as he explained in a recent Fortune article, the hedge fund managers' efforts "are self-neutralizing, and their IQ will not overcome the costs they impose on investors."

June 26, 2008

Is the stock down because they missed earnings or lowered expectations? Big difference.

GM at 53 yr low.

June 24, 2008

Hawkish commentary coming from the Fed. Should strengthen market as dollar rallies.

Most people are selling losers at end of Q. They don’t want their nonsense going out showing signficant holdings in the current losers.

June 23, 2008

So far, banks and brokerages have announced the dismissals of more than 83,000 employees. And more Wall Street layoffs are expected to come in the next few months.

Taking advantage - Fortress Investment Group is considering adding another $1 billion to the war chest it has amassed to take advantage of the pain being felt on Wall Street, The New York Post reported.

Now that LinkedIn has gotten a $1 billion valuation, what of other social-networking sites? DealBook spoke with the chief executive of Doostang, a site aimed at connecting its members with Wall Street jobs, for his take on the social-networking future.Kaltura, a video company that is considered a blend of YouTube and Wikipedia, has closed a second round of funding.

Hedge fund launches slowed to their lowest level in eight years in the first quarter of the year as start-ups were stymied by investors chastened by the credit crunch, and as the shakeout from the worst quarter for hedge funds continues. More single-manager funds liquidated than launched during the first quarter of 2008 and the net total for new hedge funds was 77, according to Hedge Fund Research, a hedge fund industry data provider.

The real issue will become the downgrade of MBIA and AMBAC. Following a series of downgrades from ratings agencies, bond insurers are in talks with banks, looking to wipe away some $125 billion of insurance on debt securities, the Financial Times reported today. Insurers, including New York-based Financial Guaranty Insurance Co., Ambac Assurance Corp. of New York and MBIA Inc. of Armonk, N.Y., gave the banks insurance contracts in the form of credit default swaps. These swaps insured payments on collateralized debt obligations, which were normally backed by subprime mortgages.

Should the banks erase the insurance coverage (also known as “commuting” a contract), they will nix the contract in return for a payment from the insurers.
Those mortgages have plummeted in value in the past couple of years, following numerous defaults and foreclosures.

The value of the contracts is now up in the air but is estimated to be about $125 billion, according to Standard and Poor’s of New York.

Financial services firms, including Citigroup Inc. and Merrill Lynch & Co. Inc., both of New York, have taken write-downs on their quarterly financials due to the deteriorating value of the mortgage-backed securities.

June 20, 2008

China raised its base price for gasoline by 17%, a move that global oil traders concluded would diminish the country's appetite for fuel; benchmark crude fell 3.5%. The decision marks Beijing's largest increase in fuel prices in four years.

June 19, 2008

Banks not closing for securitzation but closing loans for balance sheet.

Return of recourse loans / personal guarantees.

Counterparty Risk Index (CDR). The CDR counterparty risk index, created by research firm Credit Derivatives Research, will track the average of the market spreads of five-year credit default swaps for 15 of the largest banks and brokers that deal in credit derivatives. Credit default swaps are contracts that insure the payment of the bonds that a bank issues. For instance, if a five-year credit default swap that guarantees USD10m (EUR6.45m) of Goldman Sachs debt trades at 105 basis points, this represents a cost of USD105,000 per year. The value of a credit default swap therefore moves inversely to the risk that a bank will default.

Healthcare REITs could be bright spot in lousy RE market.

Some hedge funds have already started to position themselves as a merchant bank with investment banking capabilities to originate structures. This allows the manager to change cash flows as he wants them, and to be a principal investor. Hedge funds have started to build their own channels of origination and enter direct lending. These hedge funds will be able to build a strong financial services company-type balance sheet - a "real" corporate balance sheet to borrow and raise equity against.

June 18, 2008

LinkedIn has made a big connection with investors, who are valuing the professional-networking company at more than $1 billion. LinkedIn said it had received $53 million in venture capital funding from Bain Capital Ventures and three existing investors in exchange for a 5% stake in the Silicon Valley company.

Rights offering is not dilutive. Many banks are doing this currently.

Fifth Third Bancorp said it will sell $1 billion in convertible preferred stock, sell noncore operations and slash its dividend by 66%, becoming the latest regional bank to try to shore up its balance sheet amid heavy credit losses.

We're only about a third of the way through the write-downs. Write-downs could reach $1.3T.

June 16, 2008

Record crude oil, wheat, rice and soybean prices this year have already driven inflation, forcing governments to increase interest rates as the economy slows.

Saudis to increase production has had minimal impact on oil prices. Saudi Arabia’s plan to boost production next month was seen as a sign that the Saudis are nervous about the political and economic effect of high oil prices.

Fed is now totally focused on inflation.

June 12, 2008

Class of 2009 at UNC strong to very strong - Along with forward John Henson and shooting guard Dexter Strickland, McDonald gives North Carolina three players who at least one recruiting analyst ranks in the top 10. Scout.com analyst Dave Telep said North Carolina has the nation's top class.

“It's a pretty impressive haul when you look at it top to bottom,” Telep said. “There's size, talent in the backcourt and a future NBA talent in John Henson.”

Telep said North Carolina's Class of 2006 group was better because it had the top players in the nation at three positions in Lawson, Ellington and Brandan Wright. Highly regarded post players Deon Thompson and Alex Stepheson also were in that class.

Gibbons said the Class of 2009 is better because it's deeper with frontcourt twins David and Travis Wear joining Henson, McDonald and Strickland. There's also a chance the Tar Heels will add rapidly improving power forward Ryan Kelly of Ravenscroft High in Raleigh.

“If they get (Kelly), there's no doubt, this will rank with one of the best all-time recruiting classes in Tar Heel annals,” Gibbons said. “I'm not saying it's the best, but it's one of the best from top to bottom.”

June 11, 2008

Tudor Investment Corp, a hedge fund group led by veteran trader Paul Tudor Jones III, on Tuesday said it hired the former co-heads of Bear Stearns' distressed debt group to build a new credit business. Tudor, which manages over USD18-billion (US), said Gregory Hanley and Alan Mintz, the former senior Bear executives, are joining the firm, along with other members of the Bear credit team including Mitchell Sussman, Eric Friel and Howard Norowitz. The move comes as many large hedge funds have established or expanded distressed debt operations to trade a burgeoning array of corporate debt that is priced well below face value in response to a slowing economy and rising defaults.

Investors pulled a net USD5.9 billion out of US hedge funds in April, marking the industry's biggest outflow in 6-1/2 years as they punished managers for their worst-ever returns at the start of 2008. According to new data released by TrimTabs Investment Research and BarclayHedge late on Monday evening, investors took USD9.4 billion away from individual hedge fund managers and added USD3.5 billion to funds of hedge funds, portfolios that spread select a group of individual hedge funds.

Constellation Brands' Columbia Winery has been sold along with sister winery Covey Run as part of an eight-winery, $209 million deal with Ascentia Wine Estates, a newly formed private company based in California.

May 27, 2008

Since August, banks worldwide have announced plans to eliminate as many as 65,000 jobs.

Kleiner Perkins Caufield & Byers is reportedly leading a $15 million round for Pelago, the first company to tap iFund, the $100 million cash pool Apple launched in partnership with the V.C. firm to fund iPhone applications.

May 23, 2008

Sovereign wealth funds, which control up to USD3.7 trillion in assets and have been making headlines as they buy assets in the West, will ultimately have the biggest impact on private equity and hedge funds, analysts at JPMorgan Chase said in a report on Thursday. State-run investment funds currently own up to 7.5 per cent of so-called alternative assets, or about USD340 billion, and this stake could grow to as high as 17 per cent by the end of 2012, said David Fernandez and Bernhard Eschweiler, analysts at the bank.

Which Banks Own ASARX - AMF Ultra Short Mortgage Fund? We notice several thrifts disclosing in recent 10-Q filings (and some via 10-Ks) that they hold investments in a mutual fund of mortgage-related securities that has declined in value. The AMF Ultra Short Mortgage Fund is managed by Shay Assets Management in Chicago and trades under the ticker "ASARX". On the surface, the trading price of ASARX has dropped from a high of $9.50 in 1Q-08 to last night's close of $9.18. For a fixed income fund, especially one with a short-term focus, a 3.4% drop is not irrelevant. However, the real concern should be whether there are appropriate bids for the underlying mortgage securities within the ASARX fund (i.e., see the fund's disclosures via this link: http://www.amffunds.com/html/fdetails-asarx.php).

May 20 (Bloomberg) -- Heckmann Corp. said it agreed to buy China Water & Drinks Inc. for $625 million in cash and stock to tap into the fast-growing Chinese bottled-water market and gain a foothold in the global water business.

May 22, 2008

51.com, one of China's largest social networks, is closing a $50 million round and plans to launch a platform for third party developers later this summer, VentureBeat reported.

Twitter has raised a new $15 million round of funding, following a bidding war by venture cpitalists eager to get a slice of the micro-blogging start-up, according to an unsourced report from GigaOm.

THIS IS A GOOD ONE
Moody's lost about $1.7 billion in market value on Wednesday after a Financial Times investigation into complex debt instruments known as CPDO's found that a computer glitch led to incorrectly high triple-A ratings for these securities. The attorney general of Connecticut said he was investigating how Moody's had dealt with the possible errors.

May 21, 08

High yield bonds had their best month in April since 2002. Spreads have narrowed nearly 2% from their 1st quarter highs, when junk bond indexes traded at yield premiums of 7-8% over comparable Treasuries. The nearly 9% yield available from the SPDR Lehman High Yield ETF (JNK) is attractive on a relative basis, but conservative investors seeking income may want to wait to see if higher yields develop as defaults rise and Treasuries correct. Historically, absolute yields of 10% have been an effective threshold forthe high yield asset class to be considered attractively valued and for investors to be adequately compensated for the risk inherent in junk bonds.

For taxable investors, municipal bonds offer good value. Dislocations in the municipal bond markets (e.g. auction failures and uncertainties regarding the solvency of bond insurers) have pushed muni bond yields to historically high levels relative to Treasuries. For taxable accounts, the PowerShares VRDO Tax-Free ETF (PVI) offers an attractive short-term, high quality fixed income alternative with a taxable-equivalent yield as high as 4.67% (see table at bottom of page).
Lehman Brothers is cutting roughly 1,300 positions globally, or nearly 5 percent of its work force, amid difficult market conditions, Reuters reported.

Bankers at Jefferies Group on Wednesday forecast an improved deal pipeline for initial public offerings for companies in the business of reducing the world's carbon emissions and fossil-fuel consumption, following a dry spell in the first quarter.


http://static.seekingalpha.com/uploads/2008/5/20/fixed_etf.jpg

May 20, 2008

Collateralized debt obligations, the securities that contributed to USD323 billion of bank writedowns, 65,000 job losses and the collapse of Bear Stearns Cos, may be staggering back to life. Babson Capital Management LLC took over a USD680 million CDO from Hartford Financial Services Group Inc this month, adding to the USD22 billion of the securities it oversees. Deutsche Asset Management replaced London-based Brevan Howard Asset Management LLP on a CDO in April. Blackstone Group LP, the largest buyout fund operator, sold three CDOs totaling USD1.3 billion in April.

May 13, 2008

Strategic buyers have the upper hand in the market currently. Financial buyers are fading.

Farming in Brazil for Americans. Another "super" trend.

May 12, 2005

Bloomberg: China's inflation accelerated to close to the fastest pace in 11 years, underscoring the government's challenge of taming prices without triggering an economic slump as export demand fades. Consumer prices rose 8.5% in April from a year earlier, the National Bureau of Statistics said, after gaining 8.3% in March. That compared with the 8.2% median estimate of 22 economists surveyed by Bloomberg News.

For the first time since December 2005, futures traders are turning bullish on the dollar. The difference in the number of wagers by hedge funds and other large speculators on a gain in the greenback versus the euro, known as net longs, was 21,315 on April 29, figures from the Commodity Futures Trading Commission in Washington show. There were net-short positions in each of the previous 123 weeks. At the same time, traders have stepped up their purchases of options that profit from the dollar's

Apr 30, 2008

Grain-processing giant Archer-Daniels-Midland yesterday reported a 42% year-to-year increase in quarterly profit,

John McCain rejected calls by his Democratic opponents for universal health coverage, instead offering a market-based solution with an approach similar to a proposal put forth by President Bush last year.

Credit Suisse said Tuesday that it has hired Norman Y. Mineta, the former Transportation secretary, as a senior adviser for infrastructure and transportation projects and deals.

The drop in private equity fees is much steeper. Fees from advising and providing the loans for buyout deals have fallen a whopping 74 percent from last year. While all the top banks have seen private equity fees drop by at least 70 percent, some have gotten hit especially hard.

So far this year, the amount of investment-banking fees generated from all deals worldwide — both strategic and private equity transactions — has fallen 40 percent, according to Dealogic’s calculations. The number of deals has declined only 19 percent, though, suggesting that the deals are getting smaller and so don’t throw off the same volume of fees as the larger ones.

Apr 18, 2007

Hedge funds were down an average of 1.5 per cent in the 2008 first quarter, their worst quarterly performance in almost four years, as a rebound in February failed to cover losses in January and March, according to new data from Morningstar (MORN.O). The data provider, which tabulates average performance from some 8,700 hedge funds and funds of hedge funds, said equity-focused hedge funds fared the worst in the quarter, particularly emerging markets funds and US small cap funds, which lost 8.58 per cent and 8.7 per cent respectively on average.

Citibank booked upward of $13.9 billion in write-downs stemming from its risk-taking ahead of the credit crisis and $3.1 billion in extra consumer-credit costs. And investors cheered what they hope if finally an end to the misery.

Apr 17, 2008

Growth becomes attractive when growth is scarce. Feel it like GOOG today. Up 70 pts.

As many other companies have done this year, CIT sacrificed its dividend to its balance sheet, cutting it 60%.

Morgan Stanley has established a team in its Dubai office to cover sovereign wealth funds and financial sponsors in the Middle East and North Africa (MENA).

Again Infrastructure is a bog play and attracting huge amt of assets. 3i India Infrastructure Fund raises US$1.2B. 3i Group has raised US$1.2 billion for its 3i India Infrastructure Fund, exceeding the US$1 billion target by 20%.

If the US dollar had remained strong in the global economy, oil might, in theory, be around $65 per barrel. However, oil is priced in dollars, and oil prices continue to rise.

China Inflation- As expected CPI inflation came in at 8.3% year on year. This implies that prices declined by about 0.7% during the month of March. It also implies that inflation for the first quarter of 2008 is running at 12.9%. High level of food inflation – 21% – combined with the rising level of non-food inflation. This rising inflation in the non-food sector, even though it is still under the PBoC target of 3%, is completely inconsistent with the argument that China is only experiencing a temporary food-supply problem.

Economy and Construction Weaken, Prices Rise The economy weakened in March as consumers curbed spending and businesses faced higher costs, according to the Fed's latest "beige book" report, out this afternoon. Consumer loan demand slowed and lending standards tightened. In earlier reports today, home construction plummeted 12% during March, dropping to its lowest level in 17 years. U.S. consumer prices rebounded in March on the back of rising oil prices, a sign of growing concern for Fed policy makers in the midst of an easing cycle aimed at calming troubled financial markets. The same inflationary pressures are building in the euro zone, with prices rising at an unprecedented rate.

Apr 14, 2008

A good spot to study hard assets, etc. http://hardassetsinvestor.com/

Now we are really talking food inflation. It is creating severe global disruption. Refer to earlier comments speaking to the most recent move in rice prices.

Apr 10, 2008

DWS Climate Change Fund - a very interesting theme/topic.

Not so good / Goldman Sachs' Level 3 assets increased 39% to $96.4 billion at the end of February, from $69.2 billion in November.

Lehman Brothers has liquidated three struggling investment funds with a total of $1 billion in assets.

Apr 8, 2008

Tiger 21 - The ultrawealthy's love for alternative investments continue to grow, but at a slower pace. TIGER 21 reports that its very deep-pocketed members now allocate 11% of their portfolios to the class. That figure is up from 9.5% in 2006, which had more than doubled the 4.5% of 2005. It appears, then, that changing market conditions appears to have tamed TIGER 21 members, who generally have on hand some USD10 billion in investable assets. According to TIGER 21, its members have yanked some their allocations to PE from 9% to 7%. "It doesn't take a PhD in economics to know that the buyout market is really pinched at the moment, given the pull-back in bank lending and the sluggishness of so many business sector," says TIGER21 founder and chairman Michael Sonnenfeldt.

Back after one of it's Funds collapses. It really doesn't matter - The Carlyle Group has formed a $1.35 billion fund to troll for bruised companies and securities less than a month after the failure of one of its own investments. Carlyle Capital, collapsed into insolvency last month after it began defaulting on $21.7 billion in assets. The publicly traded company, which had been set up in 2006 on the island of Guernsey, off the coast of France, had borrowed money to buy AAA mortgage-backed securities issued by Fannie Mae and Freddie Mac. Those are traditionally considered secure and conservative investments. As the market value of the Fannie Mae and Freddie Mac securities dropped, Carlyle Capital's lenders asked it to increase its cash equity in those securities from what was 1 percent to as much as 5 percent.

The amazing fact to note is that the firm had only 1% cash equity invested in those securities. An increase of that amount on $20 billion in loans amounts to several hundred million dollars. Carlyle ended up losing about $900 million of its employees' and its investors' money on the deal.

More food inflation - rice has increased by 50% in the past 2 weeks, and 10% Friday alone.

This is the next wave that will impact the carnivores of imported products in US and other developed nations. Mounting inflation in the developing world, especially Asia, is threatening that arrangement, and not just in China, where rising energy and labor costs have already made exports to the United States more expensive, but in the lower-cost alternatives to China, too. The assocaited problem is that these developing nations are energy intense due to manufacturing economies. Energy costs are rising therefore they have to raise prices, bc/ input costs are higher. In addition, wages have had to be raised signfiicantly to keep with with inflation in food prices. Quang Vinh/Vietnam, which was founded by a 15th-generation pottery maker, has raised wages by 30 percent over the past year to keep up with food prices, which have also risen. Food is the biggest expense for the company’s workers, who earn $75 a month working eight hours a day, six days a week. Additionally, the dollar’s weakness is itself a cause of inflation in developing countries, particularly those that have barely let their currencies rise against the dollar in an effort to hold on to export markets.

Apr 7, 2008

In times such as these, much money has moved to least economically sensitive stocks -drug sector, etc. Not much beta in portfolio to get good upside if data supports strong growth prospects. Do you have enough beta?

Current situation on auction rate market per Bloomberg - Auction Collapse Quadruples Fee for Bond Alternatives

Apr 4, 2008

HY market disappeared - Sales of high-yield bonds had all but dried up this year as recession worries and fallout from a global financial crisis curbed investor demand for riskier debt. Just $5.9 billion was issued in the first quarter, an 85 percent drop over the year-earlier period, according to Thomson Financial.

Around the end of March, the pipeline of LBO debt included about $127 billion of unsold loans and $74 billion of bonds, according to Bank of America estimates.

Apr 3, 2008

January of 2008 was the worst month for hedged strategies since Long Term Capital Mgt. (LTCM) “blew up” in August of 1998. According to HFRI, the first quarter of 2008 was the worst quarterly return for hedge fund in six years. Equity markets globally were down sharply and volatility increased substantially. The S&P 500 is off -9.45% for the quarter, and daily swings have become more dramatic.

Morgan Stanley has bought another stake in a hedge fund firm, taking a minority ownership position in London-based Hawker Capital. Hawker, a fundamental long/short commodities shop, is the seventh stake in a hedge fund management firm that Morgan Stanley has taken in the past two years. The firm owns stakes of various sizes in Brookville Capital Management, Lansdowne Partners, Avenue Capital Management, Front Point Partners, Oxhead Capital Management and Traxis Partners.

This is how it happens - Daniel Zwirn, the hedge-fund manager who froze withdrawals on USD4 billion in assets about a month ago after investors asked to pull more than half their money out, is already talking about starting a new fund.

A group of ex-Wachovia Securities investment managers has launched a traditional fund management business with the backing of private equity firm Robert W Baird & Co and an alternative investment management company. Riverfront Investment Group will provide separate account portfolios and analysis to financial advisors and their clients, which will include high net worth investors, families and institutions. Baird will offer Riverfront distribution and product development opportunities. Riverfront will work with Private Advisors, the independent global alternative investments firm that focuses on the management of hedge fund and private equity fund of funds products.

Mar 31, 2008

Interesting site for tech news - Silicon Valley Insider

The Dow industrials finished March down 7.6% from where it started the year, at 12262.89, marking its worst quarter in 5½ years, since the depths of the tech-stock bust.

Mar 30, 2008

BlackRock Inc (BLK.N) launched a USD500 million initial public offering for a fund of hedge funds to trade on the London Stock Exchange, the Wall Street Journal said in an article on Friday. The fund, BlackRock Absolute Return Strategies Ltd, will provide investors access to its so-called Appreciation Strategy of investing in pools of hedge funds, which it acquired last year as part of its purchase of the funds-of-funds business of Quellos Group LLC, the Journal said.

Hedge funds that make money by speculating on the success of takeovers may be the next round of casualties in the industry, not because of bad bets but because of a lack of anything to bet on. Bloomberg News is reporting Friday that Tisbury Capital Management LLP plans to close up shop and hand the money in its fund back to investors because of there aren't enough takeovers to play to make the game of merger arbitrage worthwhile.

Monsoon Capital didn't start the year off right and it is only getting worse. The Bethesda, Md.-based hedge fund, which has pinned its fortunes on Indian stocks, told investors that its Monsoon India Inflection Fund plummeted 28.3% as of March 20, and the month still had 10 days to go. That's on top of the 17.6% it dropped in the first two months of 2008, for a whopping -45.9%. The Monsoon Indian Inflection Fund 2 was almost as bad, plunging 26.8% through March and tumbling a total of 44.4% year to date. The losing ways reflect that of India's Sensex Index, which is off 26% since Jan. 1, with more than half the losses coming this month.

Mar 29, 2008

Interesting site that serves as a central site for news on Auction Rate Preferreds. Old columns still on www.InSearchOfThePerfectInvestment.com.

More bad news - UBS could be the next bank to go down. UBS can no more justify marking down the value of the ARPs it sold its investors than it can justify having lied to its investors about ARPs being "cash equivalents." UBS Lowers Price of Security Seen as 'Cash'. Some Face Paper Losses Of More Than 20% On Auction-Rate Bonds. March 30 - UBS AG may ask shareholders to approve a capital increase of as much as 16 billion Swiss francs ($16.1 billion). The bank needs that amount of money to keep its Tier 1 capital ratio at 12 percent, the newspaper said.

Fremont General Corp. and its Fremont Investment & Loan subsidiary have been categorized as an "undercapitalized" depository insititution by the Federal Deposit Insurance Corp. and was directed to recapitalize the bank by May 26, or sell.

Mar 27, 2008

Oracle came out with cautious outlook. Generally Chambers has been optimistic specifically around global growth.

ConAgra Foods, Inc., (NYSE:CAG), announced today that it has reached an agreement to sell its commodity trading and merchandising operations conducted by ConAgra Trade Group to the Ospraie Special Opportunities fund and other investors for approximately $2.1 billion, subject to certain adjustments. The Ospraie Special Opportunities fund is an affiliate of Ospraie Management, a leading investment management firm focused exclusively on commodities and basic industries with approximately $9 billion under management. ConAgra Trade Group will be renamed Gavilon LLC upon completion of the sale.

AGAIN we see the big man going down. The largest hedge fund run by John Meriwether has plunged 28 percent this year, forcing the co-founder of the defunct Long-Term Capital Management to scramble again to stem losses and keep investors from fleeing, the Wall Street Journal said on Thursday. Losses for the Relative Value Opportunity leveraged bond fund accelerated this month, after the fund had dropped 9.19 percent from Jan 1 to Feb 28. The broader JWM Global Macro fund, also run by Meriwether's Greenwich, Connecticut firm JWM Partners LLC, was down 6 per cent through February, the newspaper said.

To quickly disappear - Hedge funds are collapsing at a rapid clip in 2008, with managers who oversaw some USD3.9 billion in assets shutting down in the first quarter. Since most of 2007's failures came in the summer, with few at the start of the year, the industry may be on track to beat last year's closures of 49 funds that managed about USD18.6 billion in assets.

WOW - how does a guitar fund raise money? / London-based Anchorage Capital has composed The Guitar Fund, a USD100 million-plus number that will invest in vintage guitars, a commodity that has played to the tune of an average 31.6% annually for the past 17 years.

Mar 26, 2008

Wall Street banks hit by mortgage losses and writedowns have cut more than 34,000 jobs in the past nine months, the most since the dot-com boom fizzled in 2001.

Orders for U.S. durable goods unexpectedly fell in February, led by a slump in demand for machinery, as the housing downturn and the prospect of a recession made companies hesitant to invest.

Bloomberg's site for calculations- quite useful

Mar 17, 2008

Abby Joseph Cohen, the second-most bullish Wall Street strategist at the start of the year, was replaced by Goldman Sachs Group Inc. as the bank's chief forecaster for the U.S. stock market.

Cohen, 56, gave up the title of chief investment strategist and will no longer make predictions for the Standard & Poor's 500 Index in her new role as senior investment strategist.

JP Morgan to pay about $240 million for the fifth-largest securities firm in a transaction in which the Fed will guarantee as much as $30 billion of Bear Stearns's ``less-liquid'' assets. No downside risk for JP.

"Whac a mole" - Fed reduced the rate on direct loans to banks by a quarter-percentage point to 3.25 percent.The Fed said it will allow primary dealers to borrow at the discount rate in exchange for a ``broad range'' of investment- grade collateral. Fed also extended the maximum term of discount- window loans to 90 days from 30 days. Inv Banks can now go directly to the window, previously not available.

Evolution Markets - interesting play on carbon credits, etc.

Mar 14, 2008

S&P down 49% from peak March 2000 to Oct 2002.

Today CPI report holds steady.

Fed is accepting bad and good collateral in these deals when they swap for treasuries. There are published definitions.

Macklowe could be the leveraged real estate freak in NY. He put up maybe $50MM to borrow $3B. Big trouble for him today. Hedge funds are coming in.

Munis have been offering a risk adj return that exceeds munis. 30 yr AAA muni avg yld of 5.14% earns a Cal resident in top bracket 8.72%.

Mar 13, 2008

Traders merely closed their shorts, which added huge volume to the market, driving prices higher.

As the dollar continues to fall and commodities are seen as an instrument to hedge inflation. Dollar falling to lowerst levels vs the YEN in years.

VIA SEEKING ALPHA "Well, the point of Tuesday’s dramatic $200bn intervention by the Federal Reserve in mortgage-backed markets was to stabilize the price of US government agency AAA-rated residential mortgage-backed securities and – by implication – to encourage the big banks NOT to seize assets in the way they’ve been doing at Carlyle.

Right now, it’s not clear that the Fed’s medicine has worked.

In fact, it’s arguable that the banks’ seizure of Carlyle’s $20bn-odd in assets has actually been encouraged by the Fed’s mortgages-for-Treasuries offer. Because the Fed’s new lending emergency lending facility allows the banks to swap mortgage-backed debt for Treasury Bills in a way that Carlyle could not do.

So it would be rational for the banks to take Carlyle’s assets and exchange them for top-quality, liquid US government bonds, rather than leave loans in place to a business, Carlyle, whose assets remained highly illiquid."

Mar 12, 2008

In an effort to provide liquidity to cash-strapped financial institutions, the Federal Reserve will lend up to $200 billion of treasury securities to bond dealers in exchange for collateral such as mortgage-backed securities.The securities will be made available through an auction process. Auctions will be held on a weekly basis, beginning on March 27.

The announcement pushed markets to their biggest one-day percentage gain since 2003.

Mar 05, 2008

Great info about Auction Rate Market

Spread movement on HY versus Treasuries. High yield spreads (based on the Merrill Lynch High Yield Index) rose yesterday to 775 basis points above Treasuries, which is the highest level since March 2003. Since their lows in June, spreads have now risen by 221%, which makes the current period the largest spike the market has seen over the last ten years.

Variety ways on water investing. Only practical choice seems to be the only water related ETF, PowerShares Water Resources ETF (PHO) - launched in December 2005. Recent introduction of two new water ETFs: Claymore Securities’ S&P Global Water Index ETF (CGW) and First Trust Advisors’ ISE Water Index ETF (FIW).

Mar 04, 2008

And another one - Goldman Sachs Group Inc. investment management co-head Peter Kraus is leaving after his division's Global Alpha hedge fund suffered a 40 percent drop last year.

Issuers are pushing for change after municipal bonds fell 4.9 percent last month, the most since Merrill Lynch & Co. started compiling the index in 1989. California, with the second-lowest credit ratings among U.S. states after Louisiana, sold bonds today at yields ranging from 2.85 percent on debt due in two years to 5.40 percent on securities maturing in 2038.

Very good Muni news and updates

Mar 02, 2008

When have we ever seen muni yields at significant premiums to taxable Treasury yields.

Investment banks saw revenue from advising on M&A fall 44% in the second half of 2007.

Feb 29, 2008

Next on chopping blocks. There are som many more to come. Mr. Cassano’s exit follows the report of AIG’s largest quarterly loss of $5.29 billion, or $2.08, per diluted share. That’s down from $3.44 billion, or $1.31, per diluted share for the same period in 2006.

Who will go down first? Do we need them all? Moody’s affirmed MBIA’s triple-A rating, after the company raised $3 billion in capital. The company also agreed to separate its municipal and asset-backed businesses in the next five years, and to stop granting coverage to asset-backed debt for at least six months. Moody's Investors Service announced today that it has concluded its analysis of the residential mortgage and mortgage-related CDO exposures of Ambac Assurance Corporation, and is continuing a review for possible downgrade that was initiated on Jan. 16.

Buffet's letter released

Feb 26, 2008

China growth- chinese to build 5 new airports in next 5 years

Steel billet futures, launched on the London Metal Exchange (LME) on Monday, will eventually attract fund managers as they are an excellent indicator of the global economy, the LME's chief executive has said. Initial liquidity would be driven by steel merchants and traders. Steel billets, semi-finished products used mainly in the construction industry, began trading on the LME overnight via electronic and telephone trading, known as a 'soft launch'.

Stagflation worries - Big jump in wholesale inflation The U.S. Labor Department reported producer prices jumped a monthly 1 percent in January on rising energy costs and saw an annual 7.4 percent increase. It was the biggest 12-month gain in more than 26 years, when the United States was emerging from a period of low growth and high inflation known as stagflation.

Feb 25, 2008

SCARY STUFF - San Francisco Bay Area Cash Concerns (per FigPartners): This weekend in The San Francisco Chronicle , there was an article about a local municipality currently facing a cash crunch caused in part by evaporating revenues from property taxes. The city of Vallejo is contemplating a bankruptcy filing and we do not think it will be the last municipality to do so in either the Bay Area or the Central Valley. So far, Vallejo has reduced staffing at libraries and emergency call-centers, rotated fire station closures and indefinitely deferred maintenance to streets and public parks. Increased business taxes and decreased city employment are likely next. The sudden inability for home owners to pay their mortgages – let alone property taxes – and the swift decline in property values has combined to put municipal governments in a pinch. While most all governments in California will face similar cash shortages, those that financed current capital expenditures (i.e. streets and schools) with future property tax dollars will likely be hurt the most and there are a lot of them. Contra Costa County – perhaps the biggest county in the Bay Area – is experiencing the sharpest increase in foreclosures and several cities in the Central Valley built entirely new downtowns in the last few years. The double whammy of increased taxes and lower quality of life will undoubtedly impact California’s small business and community banks. The effect will be most felt by banks in municipalities that declare bankruptcy, but it is something to keep an eye on.

Finally two India-focused ETFs The WisdomTree India Earnings Fund (EPI) began trading on the NYSE Arca this morning, trading a million shares straight out of the gate. On Monday or Tuesday, PowerShares will follow up with its own India ETF: the PowerShares India Portfolio (PIN).

The suits begin: HSH Nordbank alleges that UBS did not manage the assets in line with its "prudent investment objectives".

Feb 21, 2008

Established in 1994, the Miami-based closed-end equity mutual fund (NASDAQ: CUBA) trades like a stock and invests in companies that stand to benefit from the end of the U.S. embargo on Cuba. The fund hit a midday high of $9.50, and closed up $1.26, or 16.94 percent, to $8.70

The Conference Board's gauge of leading economic indicators

The report is designed to predict where the U.S. economy is headed in the next three to six months.

Philadelphia Federal Reserve's February manufacturing index.

Massive deleveraging taking place.

Silver hasn't seen today's prices since Nov 1980.

Feb 20, 2008

(per research note) Macroeconomic trends/analysis, basic research and an awareness of the political situation in several grain producing countries.
1. Rising standards of living in China, India, and many other countries will mean more consumption of meat. Increased meat consumption requires a lot of grain to feed animals. As most everyone knows it takes several pounds of grain to produce one pound of meat.
2. If more corn is used as animal feed, other grains will need to be substituted for other purposes. When other grains are substituted for corn, demand for those grains grows and their prices also rise. It is a simple case of rising demand and almost static supply.
3. Supply of grains is hard to increase as it can take a very long time to build the infrastructure to store and deliver any new grains produced in previously unfarmed areas. To add production in already farmed areas is very difficult. More fertilizer and special seeds are two methods available to increase crop yields.
On top of these, many politicians have created unintended consequences when they sought to pander to farm voters. For example, corn availability is being further diminished by the politically popular, but highly economically and environmentally flawed system of using corn for ethanol production. In the U.S., it has become politically popular to suggest that ethanol will reduce our dependence on foreign oil. Ethanol production from corn is incentivized with tariffs on imported ethanol and economic subsidies of various types in the U.S. and in several other grain producing countries.

Ethanol will prove to be a poor alternative fuel and very costly environmentally and financially. Of course, ethanol production from corn has the effect of diminishing the amount of corn available for animal feed, therefore further driving up prices.

May '08 contract prices over 100% odds of a 75bps cut by the April 30th meeting, and even a 77% chance that Fed Funds reaches 2.00% (or -100bps) by July ‘08.

Feb 14, 2008

FGIC Corp. lost its Aaa bond insurance rating at Moody's Investors Service, which said the company is in worse financial shape than larger competitors MBIA Inc. and Ambac Financial Group Inc.

FGIC, the fourth-largest bond insurer, is about $4 billion short of the amount of capital needed to justify a Aaa ranking

Oil- demand projected at about 90MM barrels of oil a day in 2010. Current production is about 85MM a day. Oil production has averaged about 2.3% per annum since 1965.

Feb 13, 2008

MBIA and others would much prefer reinsuring the part of their business that is at greater risk for future losses. They would like to pay a smaller premium than what Berkshire has suggested. Buffet only wants to ensure policies on the $800B of muni bonds not the mortgage piece. Insureres would pay a steep premium and prob not accept terms of 150% of premiums to Buffet.

A plan is better than a genius with no plan.

Feb 12, 2008

Def rate on inv grade munis is .1 over 10 yrs vs 2.1 for inv grade corp.

tech has been kicked senseless down about 20%

SPDR Lehman Int'l T Bond (BWX) - .5% exp ratio and doesn't hedge currency exposure.

Feb 11, 2008

Emerging markets stocks have produced a cum 383% return over the past 5 yrs vs 83% for S&P 500. Remember the dollar seems undervalued and could make situation worse assuming we have rebound.

Emerging markets returned about 37% for 2007 / developed nations 12% / HY 2% / US large cap 7%.

Risk is taking shape as HY bonds now return about 6 pts above the 10 yr.

Feb 08, 2008

MENA - middle east north africa investing. Funds would be Algebra Capital, T Row Price Europe and Med, SPDR MEAF etf.
FXI - HK and mostly China H Shares
EWH - HK market

Feb 07, 2008

The muni chain of events - if AMBAC and MBIA are eventually downgraded it will make it harder for munis to be sold. Investors will demand a higher yld to compensate for perceived higher risk. If cost to the municipality increases they might to increase taxes at the local level... Attractive opt now as Buffet has moved into bond insurance business.

Feb 05, 2008

ism services index came in at lowerst level in 6 yrs- bringing back recessionary thoughts.

LCDX - index of leverage loans has dramatically fallen since mid '07

Feb 04, 2008

We have seen recent moves to the upside in Silver. Economy strengthens the industrial demand will increase.

Jan 31, 2008

Interesting to see that the VIX, a measure of stock market volatility / fear, declined by about 17% for this week. Stocks rose significantly for the week.

The dollar has been very strong vs more and more bad news. A sign that the weakness might be over. Could see strengthening in the near term vs the Euro.

Feb 1, 2008

Wall Street's best week in almost five years. The difficulty of market timing - why you don't get out and the fact that you lose on fear. In a week during which the Federal Reserve slashed benchmark U.S. short-term interest rates, the Dow and the S&P 500 notched their best weekly advances in almost five years, gaining 4.4 percent and 4.9 percent, respectively. The Nasdaq posted its best one-week jump in nearly 18 months, finishing up 3.8 percent in the same period.

Trading was moderate on the New York Stock Exchange - 1.79 billion shares changing hands, below last year's estimated daily average of roughly 1.9 billion. Nasdaq about 3.10 billion shares traded, topping last year's daily average of 2.17 billion.

Jan 30, 2008

Yld curve is beginning to steepen which is a good thing. Risk becomes to be priced better.

S&P downgrades mortgage debt which overrides the Fed Cut of 50bps. S&P takes neg watch on $240 billion representing about 35% of the world's CDO market. Market ended lower.

Level 3 assets - very interesting place for the banks to become less transparent. It will be a place to hide for a while.

Jan 29, 2008

Durable goods order much better than expected, which could have FED thinking 25 vs 50bps. The FED must deliver to market expectations and provide as much insurance as possible. The risk of this strategy is higher inflation - perhaps thinking long on TIPS. Since late October 2007, the Fed has dropped its Fed Funds target by 125bps and there is still a negative 131bps spread between Fed Funds and the 2-Year T-Note. On the potential steep rise in net int margin bank stocks have rallied. The spreads are huge.

S&P 500 showing about 2.3% short, largest short exposure since 2002.

Hedge funds are on track for their worst month since the Russian default of 1998, with the average fund losing more than 3% so far this month, as per the daily HFRX Global index compiled by Hedge Fund Research.

Simple facts related to higher cost - China and India are consuming less than two barrels of oil per person per year while we consume 26 barrels, Western Europe consumers 13 to 15 barrels, Japan, Korea the same amount. Think about industrialization on billion consumer economies.