Ackman’s charity boon may get lost in a monoline crash 28 Nov 2007 The Pershing Square boss says he ll donate to charity the $500m he ll make if, as he expects, bond insurers fail. But with $1.3 trillion of municipal debt guaranteed by the monolines, his generosity might be a minor footnote in the carnage that would ensue.
EU inflation hump may actually be a jump 28 Nov 2007 The ECB's Trichet says the predicted rise of inflation to near3% will be a hump. But the ECB is reluctant to raise rates because of the credit crunch, overvalued euro and slowing growth. Hoping inflation will just decline after the hump may be too optimistic.
US investors deserve their rights (issues) 28 Nov 2007 The rush by strapped US financial institutions to raise capital exposes a weakness of American capitalism. New investors often get stakes at bargain prices. The UK rights system is preferable. It partially compensates existing shareholders for dilution and loss of control.
Multi-strategy hedge fund giants are in the sweet spot 27 Nov 2007 Multibillion dollar giant Citadel s funds are up 27% so far this year. The typical hedge fund return is about half that. Citadel and its ilk have track records, heft, reputations and builtin diversification. They re already getting more than their share of new investors money.
Virgin sitting on up to £450m Rock profit 27 Nov 2007 That's the paper profit for Virgin implied by the current value of Northern Rock's shares assuming Virgin's takeover goes through on the proposed terms. Not bad given Virgin is only injecting £200m and its smallish Virgin Money business.
Credit market fears turn recessionary 26 Nov 2007 Central banks are under pressure to provide enough money cheap enough to keep lending and business activity from collapsing. It won t be easy. It s a painful payback for the Fed s policy of letting bubbles pop themselves. The postbubble mess is proving hard to clean up.
Romania’s currency woes point to emerging strains 26 Nov 2007 The leu has tumbled since the summer, as the global credit crunch begins to be felt. Western money has poured into Romania in recent years. Now vulnerabilities are beginning to be seen. Romania won t be the only emerging market to suffer from the credit crunch.
HSBC’s SIV move separates men from the boys 26 Nov 2007 The UK bank is pulling $35bn of SIV assets onto its own balance sheet. That s simpler than the proposed superSIV, especially if the assets are sound. Rivals are in a tricky spot. Not following is tantamount to admitting greater troubles in their SIVs, or their balance sheets.
What is KKR worth? 26 Nov 2007 The private equity firm run by Henry Kravis is on the path to becoming public. Its proposed value, though, is unknown. If KKR wants a successful IPO, it needs to price more conservatively than other recent offerings. A valuation of $9bn looks like the ceiling.
Banks now centre stage in credit storm 22 Nov 2007 In the last month, the credit default spread index on European financials has widened from 17 to 62 basis points, higher than in August. Now interbank dealing in covered bonds has been suspended. If banks have to pull back to comfort investors, the credit crunch would intensify.
Fed’s lower growth forecast may stabilise markets 21 Nov 2007 The Fed s belief that the US economy had moved onto a higher long term growth track encouraged it after 1997 to keep real interest rates low. Now the Fed has reversed, and lowered its long term output forecast. That should result in higher rates and fewer destructive bubbles.
Flowers bets on another new life for Shinsei 21 Nov 2007 Chris Flowers made a fortune in the wake of Japan's banking crisis. Now he's doubling down on his investment in Shinsei Bank. The shortterm outlook for Shinsei and other Japanese lenders isn't rosy, but the Flowers group could get a bargain.
Markets face some scary round numbers 21 Nov 2007 Robots might not mark 1.50, 2, 4 or 100 as special. But such figures are investor signposts. The E1.50 dollar would confirm the message of the $2 pound the US has troubles. A 4% Tbond shows megafear. And $100 oil would prove that speculators can still have the upper hand.
Man boss may be right about hedge fund closures 21 Nov 2007 Pete Clarke reckons the hedge fund failure rate may double over the next year. That looks plausible. But the problem isn t the markets so much as the changing economics of the industry. In future, new funds are more likely to be launched under the umbrella of existing brands.
UK government finances squeezed at a bad time 21 Nov 2007 When Gordon Brown was Chancellor of the Exchequer, he largely squandered the revenue that good growth brought in. As Prime Minister, he faces a weakening economy and much slower revenue growth. The government may be forced to cut spending, exacerbating the slowdown.
Freddie Mac mess is bad news for everyone 20 Nov 2007 The mortgage giant was created to help stabilise volatile mortgage markets. But after losing $2bn last quarter it needs to raise capital, which will be tough and expensive. If that doesn t shore it up, Freddie might have to slash its mortgage book. That would roil US housing even further.
Equities finally start to catch credit woes 20 Nov 2007 Just over a month ago, the S&P 500 hit an alltime record. It has fallen 10% since then, as investors realised that wider spreads and much higher loan losses were likely to hurt growth and profits. But stock markets probably still have more bad credit news to digest.
Pressure on dollar grows, for good reasons 19 Nov 2007 Some Opec members are trying to wriggle out of their dependence on the US currency. The motivation is partly political, but the investment case against the greenback is sound. The US has big debts, low interest rates and the ingredients for an inflation problem.
Buyout loan market’s new investors bide their time 16 Nov 2007 The mutual funds, distressed debt investors and credit hedge funds that snapped up TXU, First Data and other buyout debt in the last two months are now sitting on the sidelines. For some, that makes sense. They re betting the credit market s swoon will lead to better terms.
Schwarzman contradicts himself – again 15 Nov 2007 The CEO of Blackstone says analysts profit estimates are too low. That sounds a bit like giving guidance, something the private equity firm said it wouldn t do. But Schwarzman needs to reveal more if he wants investors to have any confidence in a higher valuation.