Fed’s CP fix makes it look more like a bank 7 Oct 2008 The move to buy commercial paper may break that market s logjam. But it will be hard to reverse unless the Fed can convince nervous investors to lend directly again. By inserting itself between lenders and borrowers, it s acting like a bank. That could cause unforeseen trouble.
Personal view: Interest rates 7 Oct 2008 A decade of cheap money has brought an imbalance between supply and demand for funds. Banks are deleveraging hard, and so are loath to lend. Higher interest rates could attract capital from outside the banking system and reduce demand for debt, reducing the current imbalance.
US $700bn bailout needs to be re-aimed 7 Oct 2008 It s not too late to take the cash and use it to recapitalise weak banks directly rather than buying dodgy assets. This would be a more effective way of restoring confidence and protecting taxpayers. What s more, it wouldn t even require new legislation.
Dexia caught in failed-bailout curse 7 Oct 2008 Shares of the BelgianFrench bank keep diving, despite last week s supposed rescue a E6.4bn injection of taxpayer money. After the Fortis debacle, even governments have credibility problems. Shareholders worry with reason that a more radical plan will wipe them out.
Private equity style-drift dangers start to show 6 Oct 2008 It isn t just TPG or JC Flowers that lost money on minority investments. KKR s investments in Sun Micro and Legg Mason and Blackstone s Deutsche Telekom deal are all performing poorly. Private equity can lose more than just their investors' money.
Tarp already out of sight and mind for markets 6 Oct 2008 Last week's $700bn US bank rescue plan hasn t calmed the patient. US markets plunged along with the rest of the world before clawing something back. The Tarp was never going to be a quick cureall. If anything, the credit crunch is still spreading.
Fed’s latest liquidity bonanza could backfire 6 Oct 2008 The US central bank will pay interest on banks deposits. That should help bring in cash to fund its elephantine loan schemes. It might also offset the effects of flooding markets with liquidity. Unfortunately, though, it could further diminish banks' appetite to lend to others.
Hedge fund slump changes the game 3 Oct 2008 Hedge funds are having a rotten year and it s been getting worse, with the average fund down 7% in September. Poor performance, shortselling bans, scarce leverage, market volatility and investor redemptions all play their part. The result could be a reshaped industry.
US economic graph tilts sharply downwards 3 Oct 2008 US employment fell 159,000 in September, more than expected. Factory orders, car sales and the ISM index have all turned weaker. The US economic graph has tilted sharply downwards, looks to be heading for a recession. That will turbocharge calls for more stimulus spending.
TCI battle with Deutsche Börse is too personal 3 Oct 2008 The activist investor emailed the German stock exchange demanding an EGM to remove Kurt Viermetz, the supervisory board chairman. It s not suggesting strategy changes or other board candidates. This looks like a personal grudge not a responsible investment policy.
US Senate passes Tarp with side of sausage 2 Oct 2008 After the shock rejection of Paulson s $700bn bailout, the wide Senate majority offers some succour to investors craving action. But the House could still say no again. The bill is weighed down with a barrel of pork and last week s rescues show other solutions are possible.
Commercial paper makes ominous grinding sounds 2 Oct 2008 The market for shortterm debt saw a record fall in issuance last week. The market simply isn t open to weak companies or for long maturities. One factor Treasury issuance crowding out corporate borrowers could prolong the pain.
Bailout plan risks prolonging recession 2 Oct 2008 The US plan to rescue ailing banks will invest up to $700bn in distressed mortgagerelated securities and other loans. In a credit crunch, that will crowd out others more deserving of funding. That could deepen the economic slowdown, and is certainly likely to extend it.
Failed $12.8bn road deal bodes ill for US infrastructure 1 Oct 2008 Thanks to dithering by Pennsylvania s lawmakers, the $12.8bn offer by Spain s Abertis and Citi to operate the state's Turnpike has slipped away. The fact they couldn t even muster a vote on this pot of gold could present problems for other US infrastructure deals.
Olivant’s woes show need for stock ownership reform 1 Oct 2008 The activist investor thought it owned a 2.78% stake in UBS. But it was lodged with Lehman Brothers, and now can t be found. Olivant can t vote the shares. Others are likely to face similar problems. The rules should be tightened up.
Fat finger fiascos flourish in volatile markets 1 Oct 2008 Google s stock swung $200 per share in minutes yesterday due to erroneous orders . Such errors can be expected in small and illiquid stocks. But automated strategies now direct huge pools of money. Throw in market panic, and problems can beset even market giants.
GE’s infusion doesn’t address structural problem 1 Oct 2008 The $15bn, including $3bn from Warren Buffett, puts to rest any liquidity concerns following its last profit warning. But investors are still left with a blackbox attached to an industrial group. The capital should be used to shore up GE Capital in advance of a divorce.
Crisis calls for deposit guarantees 1 Oct 2008 Right now, even the whiff of a suggestion that deposits aren t rock solid can lead to a run on a bank. US and British authorities need to stop dithering and follow the Irish and French by guaranteeing virtually all deposits, argue Hugo Dixon and Rob Cox.
Limit stock exchange closings to disasters 1 Oct 2008 Russia closed its stock exchange three times in recent weeks to stem price declines. That s not seriously out of line the NYSE has circuitbreakers too. But they should be used sparingly. Price discovery needs to be as continuous as possible for markets to adjust.
Buffett’s investments aren’t regular stock tips 1 Oct 2008 Sure, the legendary investor's multibillion dollar bets on Goldman Sachs and General Electric are good for sentiment around those companies and generally. But Buffett's deals earn 10% every year even if the companies' common stock never gains much.