The Times reported the BIS says the delay in raising interest rates could lead to asset price bubbles as investors chase higher returns, and that govt debt was replacing private sector debt.   Link to article

The Times reported the BIS says the delay in raising interest rates could lead to asset price bubbles as investors chase higher returns, and that govt debt was replacing private sector debt.  

The Times also reported £ has appreciated to a 19-month high against the € as FX traders responed positively to a strong UK budget. Eurozone inter-bank rates had risen due to funding pressure, and a liquidity shortfall might occur across the banking system due to a large cash call on banks by the ECB. Link to article

The NY Times reported a utility company created an investment fund where it gets tax credits from start-up lessors (who have no need as they are not yet profitable), in return for cash.   Link to article

The NY Times reported on the likely $400bn bill to taxpayers from the FNMA & FHLMC lending disaster.  They're now busy possessing and selling homes, and recovering on avg 60% of defaulted mortgagor loans that they (i.e., the govt, i.e., the tax payer) guaranteed.   Link to article

IDD.com reported a US start up fund that will invest in banks, has raised $500m in a S144A private placement.   Link to article

The FT reported the UK grocery retailers have a poor profit outlook as their vols and prices are not rising though overheads are.

The FT reported the ECB said the secn industry has not done enough to restore investor confidence, noting that $800bn of euro bank long-term debt is maturing in 2010-2012.  The ECB is the largest holder of euro ABS thro its liq support for banks.

The Times reported Moody's downgrading of Greek govt debt to junk status (below inv grade) has added 50bp to its cost of debt.  As indices exclude Greek govt bonds, it will probably trigger a sell off by index tracking funds.   Link to article

The Times reported Spanish banks are being shut out of inter-bank mkt putting them at risk of a liq crisis or being forced to borrow short-term at very high rates.  In the repo mkt banks' usual collateral, Spanish govt debt, is less welcome.  The €750bn eurozone rescue package is available however.  BBVA claimed Spanish companies are shut out of the international capital markets necessitating an injection of liquidity by the ECB buying Spanish debt.     Link to article

The FT reported US broad money had contracted for 15 of the past 18 months, suggesting US inflation was not a concern.

The FT reported the governor of the BoE said the rise in UK infln over the past year was due to the 25% deprecn of £

The FT reported Euro banks are likely to need further capital support, leading to a rise in the costs of bank-sourced debt for those companies unable to tap capital markets.  Euro banks have lent $1.6trn to PIGS of which 16% is to their govts and the rest to their private sector; 16% of the banks' loans are from Germany.

The FT reported the spread on Greek 10 yr bonds widened to 221bp over German govt bunds, their widest since the € started in 1999, and up from 100bp in April.  Yields on Greek bonds rose 26bp to 9.33%

The FT reported the % of PE investors whose return has been 10% or less, has risen from 20% in 2008 to over 50% in 2010.  Just 13% say they will redudce their holdings but 40% say they will invest directly in equity rather than via PE funds, over the next few years.

The NY Times reported on higher fees banks have charged mutuals issuing Build America bonds vs typical mutual bonds, earning them $100millions.  35% of the interest on the bonds is subsidised.   Link to article

The NY Times reported on the reason why the ECB bought govt bonds: to protect its ability to manage interest rates.  It also said secn drove the rise of repo transns which drove the inter-bank mkt.  Thed latter mkt seized up when the value of banks' collateral became uncertain.   Link to article

The Times reported UK banks are to be investigated by the OFT over concerns they are raising their underwriting fees unfairly (whilst assuming less risk).  In 2009, £2bn in fees were paid for £70bn of new equity raised.  The Pru would have paid 3.5% ($735m for its failed $21bn rights issue).   Link to article

The NY Times reported doubts about which banks in Europe actually have what exposures to debt to banks, govts, and corporates.  It questioned the validity of the carry trade model used by Depfa, and highlights the risk of another seizure in the inter-bank mkt.  See Articles for quote.   Link to article

The Times reported BoE research found that non-financial companies were sitting on 'surpluses' that were at their highest in 20 years.  These might be a form of self-insurance against lack of future credit, but could stifle growth and lead to ionflation (stagflation).   Link to article

The NY Times questions the true worth of Greece and the complicity of EU nations.   Link to article

The NY Times reported on the application of the concept of insurable interest to CDS to control their adverse effects and potential conflict of interest.   Link to article

The Times reported the ECB has, oddly, bought €16.5bn of distressed soveriegn bonds (incl. Greece's) and forced banks to deposit the cash with it to avoid inflation from increased money supply.  Link to article

The Times reported on the risk of a company losing control to its bank over a breach of a covenant on its bank loan, unless it can get a waiver.  Naturally, it has blamed the market for its demise.   Link to article

The NY Times reported on the adverse effect of the depreciation of the € vs the US $, on Chinese exports (Yuan is pegged to the $) to Europe, but it's good news fro European exporters.  If the Yuan is de-pegged vs the $, it will appreciate even more, hurting Chinese exports further.  Chinese sovereign holdings of € have fallen in value as a result, but that's OK as they don't mark them to market - how convenient.  Link to article

The NY Times reported the problems european banks face: higher inter-bank rates from less availability, and holding risky sovereign debt. It also noted the global budget deficit has risen from 0.3% pre-financial crisis to 6% currently.   Link to article

Risk.net reported on an idea that govts of Spain & Portugal should consider issuing retail bonds to the public to refinance substantial bond redemptions due, and to ease exposure to foreign investors. In Spain, the public have been increasing their savings. Italy leads the way and has been able to carry a high debt load as a result of substantial retail investors in govt bonds.   Link to article

The NY Times reported on the reckless investment by a US not-for-profit credit union in CDOs that led to its collapse and cost it $150m.  The CDOs were bought under a private placement, thereby magnifying asymmetric information risk from no market pricing.  There might be an act of desperation by the brokers and banks holding the CDOs to offload them in a declining market but the union was hoodwinked and/or reckless in relying on ratings and not doing its own due diligence.   Link to article

The NY Times reported on the FX risk of eastern europeans taking foreign currency loans, and the efforst by local govts to limit exposure.  Link to article

The Times reported on the false rumours and subsequent liquidity risk that the former CEO claimed brought Bear Stearns down.  Link to article

The NY Times gripes about the dubious ethics of rating agencies and how to control them.  Link to article

The NY Times reports on the extortionate fees charged by lawyers in major bankruptices.  Link to article

The NY Times Economix blog explains where $11 trillion of supposedly lost value actually went, using the concept of PV and risk to explain what value actually means.  See embedded articles for articles on how Wall St made its money.   Link to article

The Times reports on the lax lending by european banks to Greece and calls for its expulsion from the EU and a devaluation to get it back on track.  Link to article

The Evening Standard reported €600bn could be needed to bailout european countries (pigs).  The NY Times reported on the cross-holdings of debt in Europe (see graphic).  Link to article   Link to article

The Evening Standard reported on the strategy of global banks that gave too few bankers too much control over too much money, and their mistaken concentration of risk.  Link to article

The Evening Standard reported Heathrow and Stansted lost £28m from the volcanic ash shutdown of flights, plus losses caused by snowfall, BA staff striking, and a terrorist attempt on Christmans day.  According to the ES on 23 Apr, serviced office provider, Regus, received 450% more calls for virtual meetings space.

The Evening Standard reported the FSA has said the UK's big banks haveprovided poor service when it comes to customer complaint handling.  Link to article

The Evening Standard reported personal insolvencies will rise 15% Q/Q in the first qrtr 2010 owing to the hangover effect of Christmas and the financial crisis.

insolvency

Breakingviews.com explained why rating agencies are so relevant though they should not be. Link to article

rating agencies

The Times reported Greece sovereign debt had been downgraded to junk status, triggering a flight to quality and falls in stock markets. Greek short term debt is at 15% int rate - too high for the govt to borrow and putting more pressure on it to get bailed out, which the Germans are reluctant to fund.  One option is for Greece to exit the Euro Union, devalue its own currency and boost exports.   Link to article

Greece

downgrade

cost of debt

The Times reported Greece has formally asked the EU and IMF for a €45bn bailout following its credit rating downgrade.  Market reaction pessimism has not abated and Portugal is expected to be next to fall from the contagion. Link to article

Greece

IMF EU bailout

The Evening Standard reported Brit Land sold one of its office blocks for £57m to would-be property developer McAleer in 2005, who then defaulted on its £40m mortgage from BoI.  Now Brit Land has bought out the mortgage for just £30m and has got McAleer to build a new block on the site.     Link to article

The NY Times reported ways banks misled rating agencies into assigning higher ratings to securities created by the banks.  Link to article

rating agencies

fraud

The Times reported the SEC has found that 17 of its senior officials had been spending upto 8 hours a day watching porn during work hours, some since the financial crisis.  Link to article

SEC

pornography

The NY Times reported Toyota's credit rating has fallen in the fallout of its product malfunctions.

Link to article

Toyota

credit rating

The Times reported how RBS (through its purchase of ABN) ended up paying $840m for insuring a CDS on mortgages that ABN earned a fee of just $7m for.  The $840m was paid to the cparty - Paulson (who had bet the mortgages would fall the other way, and they did!).  Link to article

CDS

credit crisis

The NY Times reported Russia has issued its first eurobond since it defaulted  in the late 1990s, and at a yield substantially lower than that of Greece and Sthn Califonia.   Link to article

eurobond

spread

The NY Times reported damning findings of the performance of rating agencies at the time of the mortgage crisis and their contribution to the subsequent global financial crisis.   Link to article

rating agencies

sub prime crisis

Breakingnews.com show why restrictive rules on derivatives business that would reduce revenues for banks, would explain a $30bn loss of banks' equity values following the G Sachs CDO scandal.   Link to article

equity value

CDO

The Times reported airlines could lose tens of £millions, and the economy too, as a result of the eruption in Iceland.  Their equity values have lost £millions already. An Alaskan volcano eruptionin 1989 cost US airlines $100m   Link to article

natural disaster

economic cost

The Times reported petrol sellers are pulling out of the UK, despite the price of crude rising and petrol prices being at record levels.  Factors for the exit include: falling UK demand for petrol, high govt duty, and the depreciation of £ vs $.  Link to article

petrol prices

currency risk

The Times reported producer price inflation rose from 4.2% to 5% - owing to an 10%pa increase in raw material costs (largely due to crude oil and metals prices rising) and oheads.  Some of this has been passed onto consumersd as CPI rose too.  GBP appreciated on hopes of a rise in interest rates.   Link to article

inflation

The Times reported that 18 US banks increased their debt an avg of 42% between quarters, indicating they window dress their reported figures (deliberately understate debt at quarter ends).  Link to article

window dressing

debt

Breakingviews.com shows why, though it has financial problems, several markets (CDS, equity, FX, and options) say the US is far from being in the same risk band as Greece.     Link to article

sovereign risk

CDS

The Times reported contrasting reasons for the downfall of FNMA: the former CEO blamed the business goals but its regulator blamed management.  Neither blamed themselves (what's new?). Link to article

FNMA

The   NY Times discusses the implications of China finally allowing its currency to depreciate.

Link to article

currency risk

China

Breakingviews.com illustrates the economic problems of countries such as Greece, who have high debt:GDP ratios and face high interest rates, budget deficits, and falling GDP.     Link to article

debt:GDP

interest rates

The Times reported yields on Grrek debt has risen to record 7.1% as the market gets nervous and offloads it.  Greece's FD says high interest rates on Greek debt are unsustainable.  Lack of european investor appetite and ensuing market volatility means it will now consider a Yankee bond to US emerging market fund investors who are more likely to take up higher risk debt than fed up and more conservative european banks.  Link to article

Greece

Yankee bond

Bond yields

The NY Times illustrates the relative financial problems of European countries, highlighting Greece's relatively poor position and that it is not alone.     Link to article

EU debt

Greece

The Times reported EMI breached its debt:earnings covenant today and allows Citi to take control in June unless investors put up more cash to avoid bankruptcy.     Link to article

debt covenant

The Times reported a hedge fund manager has earned a record $4bn last year - by taking a contrarian view on shares, including banks' at the time they were imploding.  A contrast from 2008 when he actually lost money.  Big money (the fund is $13bn) gambling?   Link to article

hedge fund

contrarian investing

The Times reported steel users are complaining about iron ore miners switching their price fixing to qrtly vs annual, claiming unfair practices.  They would of course (see News 30 Mar)    Link to article

commodity prices

The Times reported RBS has been fined £28m for price fixing in collusion with Barclays on loans to firms, thereby breaching competition law.    Link to article

competiotion law

price fixing

The NY Times reported certain miners are to change to quarterly pricing of their iron ore from annual price fixing, in light of more volatile spot market prices, and to achieve  greater profitability.    Link to article

commodity prices

The NY Times reported Greece has isued a €5bn 7 year bond confirming it can still access the capital markets, though its cost of debt is roughly double that of Germany's, and potentially unsustainable.    Link to article

bonds

Greece

BreakingNews.com reported holders of Ambac insurance in the form of CDS might be forced to get just $25c in the $1 plus high yield notes, owing to the high rate at which Ambac is losing cash from mortgage insurance payouts.  Such a haircut seems unfair to the CDS holders, but then the other policy holders might get nothing if all of Anbac's cash goes to CDS holders.    Link to article

CDS

insurance

Ambac

The NY Times reviews the current crisis, and discusses the risk of another financial crisis, re-regulation and the forms it might take. Link to article

financial regulation

financial crisis

The Times reported EMI is considering selling and leasing back its US backbook of records to create a pot of money avoid breaching Citibank loan covenants and avoid the bank taking possession.    Link to article

sale and leaseback

loan covenants

The Times reported Milan is to sue several banks for derivatives contracts (fix/flt int rate swaps) under which the city will pay higher interest as rates rise, on the grounds Milan was misled and told they would lower its debt.  The banks deny wrongdoing.    Link to article

swaps

Milan

sue

The NY Times reported on the trillions in debt raised by LBOs in times of easy money matures in 2012-14 and the risk that the market will not absorb it all and that corporates will be crowded out by the $2 trn to be refinanced by the US govt.   Link to article

debt

refinancing risk

The NY Times reported on China's deliberate undervaluation of its currency has helped its exports rise 46% y/y in Feb and its exports to the US become 4x its imports from there, plus its suppression of IMF information confirming its currency is undervalued.  The Obama administration is powerless because China is funding the US deficit through buying T bonds.   Link to article

exports

trade imbalance

undervaluation

The Times reported on how an accounting rule (repo 105) was used by Lehman to improve its gearing, but which has branded its auditor, E&Y, as being manipulative and unprofessional.   Link to article

creative accounting

gearing

The NY Times reported CDS spreads on Greek debt rose amid concerns of a rating downgrade and strikes.  Its cost of debt has risen around 3% since its crisis began, to almost 4% over German bonds that pay 3.1%.

Link to article

credit risk

Greece

The NY Times reported the USD depreciated as investors sold it in favour of riskier assets following positive economic reports on manufacturing and company profits. The deprn ended a period of apprecn owing to global fears re: China's reserve reqmts, EU (greece) budget woes, and high US employment    Link to article

currency risk

risk appetite

The NY Times reported Goldman Sachs arranged and attempted to arrange deals that masked Greece's true debt exposure by reportijng them as non-debt transactions and/or deferring payments into the future whilst getting cash upfron (akin to securitisation).  Greece was able to hide its true debt position, calling into question its government's ethics.  GS got $300m in fees on such a deal in 2001.    Link to article

securitisation

Greece

chicanery

The NY Times reported China's central bank has raised the res ratio by 0.5%, surprisingly soon after the first notice to increase (see 12 Jan News).  The aim is to curb inflation, and to avoid using interest rates as a tool as these would attract more foreign capital and put upward pressure on the Yuan to appreciate vs the $,which the auths do not want as it would affect exports.    Link to article

China reserve requirements

inflation

interest rates

The NY Times reported the contrast in debt between East and West relative to GDP, noting the East (having avoided debt-fuelled excesses of the West) is better positioned to weather the crisis.    Link to article

GDP

debt

The NY Times reported Greece's tendency to pay off self interested groups has landed it with a massive budget deficit and that these groups are unwilling to end the gravy train even though the country's finances are in an sick state and it might need a bailout.  It lost further credibility by issuing incorrect budget data.  The NY Times noted they no longer have the luxury to print their way out a bind, unlike the USA.   Link to article

economy

budget deficit

Greece

The Times reported personal insolvencies or the like, reached their highest in 2009 (134000) since records began in 1960, and 26% up on 2008. IVAs grew fastest among middle-class professionals who had lived on easy debt and whose homes have fallen in value so offer no means of further finance.  Corporate insolvencies rose 23% and will rise further as QE has ended.    Link to article

insolvency

easy money

The FT reported TV producer, Endemolm has agreed to its lenders' demands to stop creative accounting, i.e., using its capital gains - from buying back its debt below par - to boost its reported earnings and so avoid breaching covenant ratios.

creative accounting

covenants

debt buy back

The FT reported the appetite for bonds has waned (yields rose 5-10bp) but it is still there owing to equities being perceived too risk and yields on money mkt too low.  Greater demand for corporate bonds has lowered corporate cost of funds below their long term avg.

corporate bonds

cos of funds

yield

The FT reported Berkshire Hathaway has lost its coveted AAA rating following its acquisition "the railroad acquisition will reduce what historically has been extremely strong cap ad and liquidity" said S&P.  Hathaway funded the acqsn with an $8bn bond issue.

rating

Hathaway

acqisition

The FT reported BoA CE Lewis and CFO  Price failed, NY attorney Cuomo claims, to dicslose to the bank's sharholders the true extent of Merrill's losses prior to agreeing to merge.  When BoA's counsel learned of the extent he was sacked!!  BoA has agreed to pay the SEC $150m relating to BoA's behaviour in the merger. What is also astounding is BoA then obtained $billions in bailout when it told the Fed of the actual losses!

BoA

ethics

The FT reported Deutsche has made a provision of €225m to cover part of the supertax on staff bonuses, confirming they will be paid rather than avoided.

rating

USA

The FT reported Moody's warned the USA's AAA rating was at risk if the government failed to take tougher measures to tackle its deficit and/or economic growth was more robust.

rating

USA

The FT reported EMI is to ask its sh.holders for £100m or cede control to banks (Citi), whose covenants it is likely to breach.  A reserve of equity previously set aside for covenant breaches has now been exhausted.  EMI has written off 90% of its equity. See Quotes in Articles section.

bank covenants

control

The NY Times reported the US is complaining that China's deliberately undervalued currency (by 25-40% according to economists) is stealing US jobs and supporting China's exports.   Link to article

currency

valuation

The NY Times reported Kraft's bond refinancing issue went well owing to investor appetite for a number of reasons.   Link to article

bonds

The NY Times reported Dresdner seems to be much more successful at selling art (it sold a piece for a record £65m) than in acquiring fin service firms (where it spent and lost $billions).

Link to article

M&A

art

Dresdner

operational risk

valuation

inflation

bank reserves

economy

securitisation

bubbles

housing mkt

Greece

bond

premium

Greece

bond

premium

The Times reported the depreciation of GBP has helped exporters increase their overseas sales and enter new markets.  Lack of confidence in future stability (currency, growth, the economy) are all major concerns when exporters consider long-term investment strategy.    Link to article

FX risk

exporters

confidence

bridging loan

bond

bond

swaps

fees

monetary policy

stock markets

PE ratio

monetary policy

inflation

reserve ratios

bond

PIK

Landesbanks

bailouts

The NY Times looks back at the merger of AOL and Time, considered to be one of the most disasterous.  

Link to article

merger

AOL Time

Landesbanks

bailouts

currency

devaluation

expropriation

Fed

housing bubble

loan to own

credit suisse

fees

transfer pricing

profits

tax evasion

finance

costs

working capital

debtors

cashflow

hedging

predatory equity

Dawney Day

corruption

cashflow

tarrifs