THE FINTAG NEWSLETTER
@ Fri 07 November 2008 : GMT

FINTAG COMMENT

Mates Rates.

So Asian imported inflation is no longer a cause for concern? The ECB and Bank of England decided to follow the Bernanke path and slashed rates. Lots of media excitement, equities took a pounding and Libor hardly moved. You see base rates don't mean much when they fall to silly levels. Look at Japan where even 0% wasn't enough to kick start an ailing economy for many years. But let's not complain because low rates is what Greenspan used to believe in and look at the fun we had as his bubble expanded. We all need another bubble with lots of cheap debt and reckless spending. Problem is it could be 5 years before it starts to pump up.

Nobody cares for rates if there is no liquidity. Even if you borrow at 0% but prices are falling, why would you invest when it could be cheaper tomorrow?

That is why equities are a dead asset class for the long only crew. It gets a bit dull saying these are extraordinary times but they are. It makes me tingle all over thinking of all those money making opportunities ...now where is that leverage from my prime broker? Mmmmm....

Of course the UK rate slash was politically inspired. Gordon Brown's by-election in Glenrothes, the need to auction billions of government debt at low rates of interest, the IMF ready to bail out the sick man of Europe 1976 style, or is it because everyone else is doing it? Whatever the motivation it has spelled the death of the Bank of England's independence. Why so sharp? It was another knee jerk reaction that markets did not like and down we go again. No wonder the markets are so volatile when leaders say one thing and do another. The UK rates are now below the Euro.

So if you are a saver, don't bother. The banks need all the deposits they can get but when rates tumble this low, you might as well spend it. What a conundrum but what fun too.

As for Buzz Lightyear, it looks like he has been found out already and his honeymoon lasted 1 day. Oh dear.

No Rate Increases
Thanks to Tradebot for today's picture.

BOE KEY RATE FALLS BELOW ECB'S FOR FIRST TIME:

bloombergFintag says
I thought I was feeling sick. Us Brits never do anything in moderation. Its our binge drink culture and is what makes us the most interesting, clever and funny people in the world. And that includes Ricky Gervais.

STOCKS PLUNGE AS INVESTORS PONDER OBAMA

new york postFintag says
And the man has only just got married. This could be the quickest divorce ever and the man hasn't even moved into his new home.

Still, at least the new uncertainty world order is back on track and the bouncing along bear market continues its downward spiral. Equities are not quite dead because historical yields are looking pretty high. The issue is whether these dividend yields will continue.

As they say, one profit warning is always followed by another. And another. And another.

Here is a letter I received from a well known US owned bank. Great comfort that it is serving my best interests:

VW MANAGER EARNS €1M IN SHARE SALE

financial timesFintag says
Grrrrrr!

HEDGE FUNDS TO FACE REGULATION

financial newsFintag says
...And good luck to them. I am no longer a Hedge Fund manager (call me a money markets manager since most of my assets are cash) and given there is no definition of what a Hedge Fund manager is, good luck. Given also most Hedge Funds have been long only and / or useless, as well as the industry being on its last legs, all I can say is Horse, Bolted, etc etc.

Not that I dislike regulation. Well actually I do. But here is a thought. The most regulated industry in the world went phut (Insurance, Banking) and the Hedge Funds have hung in there without civil servants dictating what we can and cannot do.

BANKS URGED TO PASS ON HUGE CUT IN INTEREST RATES

timesFintag says
Banks are simple creatures. They make a turn on the rates they lend at and the rates they borrow at. But they also look at the credit risk of the borrowers. If they look risky, they put rates up. This is capitalism.

If governments want to run banks, then do so. I would welcome it. As long as Hedge Funds get our leverage back and low rates then great news. But I am not sure why you want to encourage the people to borrow even more than they already have done.

They cannot pay off their existing debts and lowering rates just delays d-day.

Here is some fun news (sorry for text only viewers).

HEDGE FUND RESULTS SEEN GOING FROM BAD TO WORSE

new york timesFintag says
And this is a GOOD thing. Clear out the chaff, that is what is needed. No more academics and celebrities thinking they are prop traders. We can blame this piece of pornography for the world's ills:



Although maybe Man should have bought a copy:

hedge funds review says " Man Group reports mixed results for end of third quarter "

BANKS THAT POCKET RATE CUTS FACE TOUGHER ACTION

independentFintag says
So banks owned by the government are to be beat themselves up? Sounds like a good idea. I am looking for a small business loan to set up a service that helps transition red hot blooded investment bankers into waistcoat loving civil servants.

First test will be, are these products appropriate assets to acquire for a civil servant?

PRELIMINARY INJUNCTION AGAINST ML-IMPLODE DENIED

hf-implodeFintag says
More mates being taken down and sent to death row. This blogging game is a dangerous activity.

GOOD TIMES ROLL FOR MILLENIUM QUANT FUND

finalternativesFintag says
There we go. Proper hedgies.

MIDDLE EAST INVESTORS EYE EUROPE

financial timesFintag says
I guess this makes sense to snap up cheap assets while you can. Once oil hits below USD30, the middle east runs out of money.

CREDIT SWAP DISCLOSURE OBSCURES TRUE FINANCIAL RISK

bloombergFintag says
Hedging CDS's is near impossible and yet everyone loves them and the market runs into tens of trillions. It is opaque and all made up. It is. One of my former bosses is the architect of this market and even today laughs at his emperors clothes. He is nearly retired so why should he care. It is now for others to sort out.

I was going to mention the rate drops by the Swiss and Koreans and Blackstones awful results but I have a power outage. My battery on my laptop only lasts another 10 minutes so no time for editing either.

Have a nice d