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.