Fed rate cut addresses wrong problem 29 Oct 2008 Its halfpoint rate cut does not address the leverage and credit issues in the banking system. Indeed, by penalizing savers it worsens the economy s supply/demand imbalance for funding. The cut doesn t solve shortterm problems and worsens longterm inflation worries.
Risky finance: AIG 29 Oct 2008 AIG offers a case study on how an ambitious regulator was taken in by what it hoped would be a national champion. Nicholas Dunbar reports.
Mexico has the crisis without the growth 28 Oct 2008 Mexican foreign exchange reserves are falling fast and its credit spreads are widening. In spite of its stable budget and payments positions, it is suffering a meltdown without having first enjoyed a boom. Its unfree markets hinder growth but do little to avert periodic chaos.
Treasury must explain capital injection decisions 27 Oct 2008 The US government has bought stakes in fourteeen more banks. Which other firms will enjoy its largesse is a mystery. The government has not issued official criteria aside from saying only healthy institutions need apply. Clarity is needed over who is making decisions and why.
Merger of US watchdogs would add bark and bite 24 Oct 2008 SEC boss Christopher Cox backs a combination with the US futures regulator. That would fill in gaps in current regulation and give overseers more information and clout. It should also make policing both markets easier, too assuming the new watchdog is given adequate teeth.
Should Citadel have put its head over the parapet? 24 Oct 2008 The Chicago hedge fund held a surprise call with lenders to assure them about its finances. That was risky in the wake of Lehman s and Bear's disastrous attempts to tamp down market rumours, lenders might not have bought Ken Griffin's story.
No investment ideas? Try wood, gut, metal and glue 24 Oct 2008 That is, as assembled by Stradivari. Stocks, bonds, oil and even paintings are proving unreliable investments. Fine violins, violas and cellos could be worth a look. Illiquidity is a problem, but returns go well beyond the financial. And there's an opportunity to start now.
How to build a better stimulus package 23 Oct 2008 Proponents of a US stimulus spending package believe it would provide a Keynesian economic boost. Past stimulus packages have been disappointing; this one could prove harmful. However there are ways to optimize the stimulus s economic effect.
Greenspan among the last to recognise his flaws 23 Oct 2008 The maestro is in a state of shocked disbelief that selfregulation didn t work in the banking sector. While the mea culpa from the combative former Fed chairman was unexpected, he s hardly the first to recognise the shortcomings of his handsoff approach.
US junk bond market girds for spike in defaults 23 Oct 2008 Half of all US high yield debt now trades at levels that usually indicate a serious risk of default. If past correlations between interest rates and credit risk hold true, it means about $180bn of debt will go toes up in the next year.
New muni monolines may perfect the buggy whip 22 Oct 2008 Macquarie and Citadel are backing a new municipal bond insurer, following in Warren Buffett s footsteps. But the US market is less than half its former size and big bond issuers like California say they can do without. Muni insurance may become a much tougher business.
At least latest 500-point Dow drop looks rational 22 Oct 2008 Not so much for the level of the index, but because investors appear motivated by evidence of global economic weakness rather than indiscriminate fear. Even Wachovia s giant loss didn t figure much. It s hardly good news, but any sign of clearer thinking is welcome.
UBS’ Gulf private equity fund won’t have free run 22 Oct 2008 The Swiss bank s targeted $500m fund adds to a region teeming with private equity groups struggling to close deals. Longestablished players still primarily channel cash elsewhere. While the crunch opens new opportunities, investing in the region is still tough and risky.
Market plumbing set to flow more easily 22 Oct 2008 The merger of LCH.Clearnet and DTCC will create the world s biggest clearing and settlement operation. That will be tough for competitors but good for users. The new giant should exploit the trend to clear more offexchange trades making global finance a bit safer.
Where have all the debt vultures gone? 21 Oct 2008 Plunging prices of distressed debt should have them swooping. But many have seen earlier investments nosedive, and now are only dipping in an occasional talon. That could be smart the outlook for dodgy companies and their borrowings is far from clear.
Banks aren’t rushing to ditch fair-value 21 Oct 2008 The EU has followed the US lead in allowing banks to ignore market prices for some securities. Some French bankers would like to go even further. But as long as investors are hanging on every mark, few banks are likely to use accounting fiddles to minimize reported losses.
Korean bailout addresses liquidity not leverage 20 Oct 2008 The $130bn bank bailout guarantees bank debts and provides dollar funding but includes no capital injection. That makes sense: Korean banks had a currency mismatch, but were modestly leveraged with little exposure to US woes. This tailormade approach should do the job.
Carlyle will be lucky to collect on oligarch 20 Oct 2008 Novolipetsk, the Russian steel group backed by Lisin, agreed to buy a US steel maker from the private equity group for $3.5bn in August. After its own value shrank by 80%, it can t afford the deal. There s little chance Carlyle will ever collect.
Dear (poorer) friends 20 Oct 2008 Hedge fund managers have been eating humble pie, although a few have managed the odd bite of I told you so as well. With a little help from Citadel, Greenlight, Lahde Capital, TPG Axon and others, Richard Beales presents a fictitious investor letter with two possible endings.
The curious case of Dubai’s credit default swaps 20 Oct 2008 Despite the United Arab Emirates underwriting its financial system, buying protection against Dubai's debt still costs five times more than for neighbouring Abu Dhabi. It s unclear whether individual emirates debts are guaranteed investors are confused.