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.
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.
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.
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.
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.
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.
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.
Speculators may exit as commodities turn 15 Nov 2007 Speculation has been a part of the commodity price boom. Funds have gone short the dollar and long commodities. But weakening demand, especially in the US, may undermine the commodity speculators.
Global growth should be marked down to market 15 Nov 2007 The IMF says the world economy grew by 5.4% in 2006. But it relies on a model of purchasing power parity. Investors should be using market values of currencies. That gives a growth rate of 3.8%. The IMF s model also uses bad assumptions. China s PPPGDP is about to be cut in half.
Och-Ziff IPO shrugs off jitters to price for perfection 14 Nov 2007 The hedge fund, which manages $30bn of assets, picked a good day for pricing its offering and got a high price. OchZiff is a quality name in the hedge fund world, but the valuation doesn't allow for any disappointments.
HSBC rings financial alarm again 14 Nov 2007 The global bank has raised its provisions for the US consumer slowdown. This time unsecured loans as well as subprime mortgages are to blame. That may not be just bad news for HSBC. Given that it has been a leading indicator of financial damage, it looks an issue for peers too.
Amaranth’s lawsuit against JP Morgan reveals two botched bets 14 Nov 2007 The defunct hedge fund lost a bundle on a huge natural gas wager. It now alleges that JP Morgan exploited its role as its broker to block white knights. The suit s merits are debatable. But the debacle illustrates a second bad bet: leaving a fund at the mercy of a single broker.
UK economic outlook is even gloomier than BoE thinks 14 Nov 2007 The Bank of England predicts a sharp slowdown in the UK economy and expects to cut rates even though inflation will rise a little. That makes the UK a pale shadow of the US, according to the Bank s Governor, Mervyn King. But that shadow is likely to darken.
E*Trade, money funds should envy hedge funds’ lock-ups 13 Nov 2007 Their shareholders, like those of Northern Rock before them, worry that depositors will pull out their money on short notice. Most hedge funds lock up their investors' capital for months. That s why they re better placed to own illiquid subprime assets.