28JAN09:
Q1-09 DOW: 8900
Q2-09 DOW: 7250
Q3-09 DOW: 5810
Q4-09 DOW: 3960
CITI NATIONALIZED
OBAMA GETS SICK 27AUG09:
Mini Crash 21SEP09 Predicted correctly:
Bailout=Bonuses
Demise of Bear Stearns
Demise of Lehman Bros.
Demise of AIG
Subprime would cause problems
Date of 2007 crash
CRAs were to blame
G20 riots were a party
Northern Rock run
Northern Rock Nationalization
HBOS and RBS demise
UBS really was Useless
Our daily bread just got a little bit more expensive.
When foodstuffs rise in price, we have two options. One is not to eat and the second is to ask for higher wages to pay for the increase in price. This causes inflation. The US may be booming in exports because the dollar is worth peanuts but its imports are rising in price (oil, toys, cars, wheat) and this is what is keeping Bernanke awake at night.
The banks - are they in trouble or has the trouble passed? All I know is that many are using up their budgets to the end of this quarter and looking at slashed budgets for 2008. Hiring freezes are quite specific (many are still hiring in their alternative groups) and we are in a "waiting game". They have had their subprime write off fun and now they waiting to see who takes the lead and fires thousands of workers. Redundancy is expensive and painful, especially if you have to re-hire a year later. The recruitment agents are experiencing a very quiet December and the outplacement consultancies are taking more office space in anticipation of the deluge.
The news is pretty grim. Lots of rehashes of old news and themes and you would be better off enjoying a trip to the shops and grabbing some last minute sale purchases - that is if your credit card company has not frozen your limit of course in which case you should go onto ebay and sell your possessions.
A trip down memory lane This is my comment of 1 year ago: Dec 18, 2006 "The problem with debt is that it has to be paid off - or passed onto another sucker. Hedgies maybe leveraged but they usually have collateral that is worth something. Most Pirate Equity funds live off "fair values" and most of their recent investments are way over fair value. That is what cheap money does - it keeps your eye off the true value of things.
Right predictions: Aston Martin, AstraZeneca, Farming Are 2007 Tips: Matthew Lynn (bloomberg) Predicting that U.K. Chancellor Gordon Brown will take over as prime minister in 2007 is too easy. Tony Blair has already said he will leave office next year, and Brown has seen off all contenders. Yet the charmless, wooden Brown will be a calamity. By the close of the year, he will be presiding over a faltering, debt-ridden economy, poorly planned wars in Iraq and Afghanistan, and his native Scotland will be clamoring to leave the U.K. Blair clones on the backbenches will be mutinous, and the Labour Party will realize Brown is leading it to certain defeat. Nobody likes losing, so Brown will face a challenger for the leadership.
Wheat prices yesterday surged to fresh all-time highs above $10-a-bushel amid fears that strong demand from emerging countries will eat into depleted global cereal inventories.
The market gained additional support after Argentina confirmed that its wheat crop had suffered heavy losses after frosts last month hit the Buenos Aires region, which makes up more than 60 per cent of the country's production.
Argentina is the world's sixth largest wheat exporter, accounting for about 7 per cent of the market, according to Deutsche Bank.
Extreme weather this year damaged the crops of other leading exporters, including Australia and Ukraine.
The CBOT March 2008 futures contract, that yesterday became the market's benchmark after the expiration of the December contract, jumped to an all-time high of $10.09½ a bushel, after hitting its 30 cents daily trading limit.
It was later trading at $9.80 a bushel, up ½ cent on the day.
Tobin Gorey, a commodity strategist at Commonwealth Bank of Australia in Sydney, said that the seriously depleted harvest in Argentina had acted as a "catalyst" for the price jump.
Fintag says And you still think bio-diesel is a good idea?
When people start feeling a recession is going to start, the types of film they watch changes. In the great depression, humor and romance were the order of the day. So when Will Smith's (no we didn't copy 28 days later) new "I am Legend" or "The world is against me" film breaks all box office records for a weekend, it tells us the average American feels alone and surrounded by people who are out to get you. [Editor: Lame]
Goldman Sachs could be on course to launch one of the largest hedge funds to date with at least $6 billion (£3 billion) from investors and its own balance sheet.
The new fund, Goldman Sachs Investment Partners, will open on January 1 and is being run by two traders who had previously worked on the bank's so-called proprietary trading desk, making equity investments from the group's balance sheet.
They are Raanan Agus, 40, who had been head of the bank's principal strategies group since 2003, and Kenneth Eberts, 41, who had been in charge of US investments since 2003.
The hedge fund is thought initially to have sought between $4 billion and $6 billion of cash from banks, pension funds and other financial institutions.
Fintag says Last night the Goldman spin machine had alluded to 10 billion. Even if its only 4 billion, Goldman just do what they want to and we all look on in awe. Why do the rest of us bother? Goldman is the world's biggest hedge fund manager whatever JP Morgan say.
dealbook says " Tudor Fund Hit With $1 Billion in Withdrawals "
financial times says " Capital Fund Management claws back losses "
The Bank of England is set to offer lenders an extra £10bn in funds as it tries to limit the impact of a global credit crunch and high borrowing costs.
It is one of five central banks that have pledged to inject $100bn (£49bn) of emergency cash into money markets.
The aim is to cut the cost of lending between retail and commercial banks, which has jumped in the past few weeks.
Should the borrowing costs stay high, then they may end up being passed on to consumers, slowing economic growth.
On Monday, the US Federal Reserve made $20bn available through auction, though it did not say how many banks took advantage of the extra money.
US Treasury Secretary Henry Paulson said on Monday that there was no "silver bullet" to solve the credit market problems.
Something that has been greatly overlooked in the reporting on Wall Street's balance sheet problems is the issue of credit exposure on derivatives contracts.
It so happens that the quarterly 10-q filing of each investment bank provides a breakdown of the amount of derivatives credit exposure based on the credit rating of the counter-parties.
I have pulled the data provided on this from each 10-q filing of the investment banks and compiled it in one chart so that we can obtain a better idea of how they measure up in this regard.
Take a look below:
Note: Figures are in billions. Tangible equity represents total equity minus intangible assets (including goodwill). Intangible assets have no value in liquidation. Tangible equity figures derived from Yahoo Finance.
Look at who has the highest credit risk exposure on these contracts:
1) Goldman Sachs
2) Lehman Brothers
3) Merrill Lynch
All three of these investment banks have exposure amounting to 70% of their tangible equity. If you wish to see the numbers for yourself, reference links (and page numbers) for all of the derivatives data can be found at the bottom of this posting.
Fintag says And only a month ago I was telling you derivatives were dead. Thanks to Basel 2, these filings will become more than interesting statistics and will force banks to reshuffle their balance sheets big time.
Credit Agencies started the credit crunch and are now finishing the banks off completely. Every downgrade means the banks need more capital. This comes from rights issues / conv bonds (eg UBS) or massive asset reallocation and cost cutting. Once the reallocation has been exhausted, the time will come for cost reduction.
Goldman are top; they have the largest level 3 assets too and the markets still see them as god.
The emperor has new clothes.
THE 2007 JAPAN STORY: FINANCIAL INVESTORS FLEE AND JAPAN MANAGERS BLEED
A disappointing end to 2007 looks intact for Japan and the hedge fund industry.
First, the aftermath of financial institution's newly defined attitude to Basel II led to an estimated US$8-12 billion in redemptions by Japanese investors from hedge fund of funds and single managers. These are this author's conservative estimates.
Second, the performance of hedge fund managers with a Japan long/short equity focus have been almost (universally) pathetic. For instance, an early December 2007 HSBC report of hedge fund manager performance had 5 out of the bottom 20 listed as being Japan Long/Short Equity managers. An an equal weighted basis, average performance was MINUS 16.47%. In contrast, 4 out of their top 20 performing funds were Asia (excl. Japan) Long/Short Equity managers with an equal weighted positive performance of 70.09%.
This means that Japan is undergoing a double-whammy of poor fundamentals reflecting a negative outlook on Japan Inc. added to which a potentially negative technical institutional outlook in which financial institutions continue to search for alpha - but in ways that do not draw on additional capital requirements on their collective balance sheets.
Fintag says Why do I bother? It was in December 2006 that I told you Basel 2 was forcing the Japanese banks to redeem from hedge funds - later reconfirmed in the summer.
WEAK DOLLAR RESTORES HEALTH TO WIDE RANGE OF EXPORTERS
Turbo-charged American exports have at last begun to sweep global markets, leading to a dramatic fall in the US current account deficit over the past year.
The shortfall in traded goods and invisible earnings fell to $178.5bn (£88.6bn) in the third quarter, down 18pc from a year ago. It is the clearest evidence to date that the weak dollar is working a powerful effect on American competitiveness, restoring health to a swathe of manufacturing industries after years of decline.
Failed hedge fund Amaranth Advisors LLC and two traders are rebutting government allegations that they manipulated natural gas markets last year.
In hundreds of pages of briefs filed late Friday with the Federal Energy Regulatory Commission, Amaranth and former energy traders Brian Hunter and Matthew Donohoe denied any wrongdoing and challenged the agency's authority to bring the case.
The hedge fund and two traders face $291 million in penalties in FERC's first prosecution of energy-market manipulation under authority Congress gave it two years ago.
Lawyers for Hunter, the hedge fund's former chief energy trader, wrote that there is "no evidence or even allegation that Amaranth's trades were in any way fictitious or deceptive" and said there is no evidence that energy futures contracts were "sold at anything other than prevailing prices."
Fintag says It takes such a long time to kill a hedge fund.
finance asia says " Awards for the best cuff links, and other nonsense "
3 comments
anonymous said ...
I have a gluten intolerance so wheat can go up as much as it wants. But how is it Big Macs are costing less?
18 Dec 07 - 09:24 gmt
FinbarsITgeek said ...
Comments have been fixed - using sessions variabes and cached pages don’t work very well.
18 Dec 07 - 14:32 gmt
anonymous said ...
ECB $500billion christmas present and the punters are still unhappy.
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