Sunday, September 30, 2007
--shrinking CP and Fed's rate cut help spur the issuance of investment grade --Fed slash rate by 50 bps, buoying investors's confidence by their willingness to step in to maintain the orderly functioning of financial markets. --In addition, companies need to drum up funds for shareholder friendly move - share repurchase --This brought total new debt to $167 billion in the third quarter -- a period marked by a credit crunch that caused investors across financial markets to reassess risk. Issuance was down sharply from the $226.5 billion seen in second quarter but still up from the $154.8 billion in the 2006 third period. --HY still struggled to regain its stride after summer standstill. New issuance fell 70% in the 3rd quartre compared to the same period last year
Saturday, September 29, 2007
Aspects of my job has evovled over time to the point where I should record them for you: I have taken additional responsibilities in order to help move forward a company high priority project. My standard responsbilities include building fixed income research data infrastructure, doing credit analysis for financial companies, and facilitating releasing routine research reports. Yet, another research department chose me to carry out a high priority project because I have the right expertise and skillset. The project was to use custodian data to seek research opportunities with regard to FI pricing, liquidity, and flows so that the company could develop new services benefiing customers. In the new project, I was not simply following the orders, but also actively contibuted my ideas for problem solving and exploring new research directions. It was rewarding to find my ideas accepted and acted on. If further opportunities arise, please consider that I contribute to two research teams and will put in whatever time and effort requried to do a good job in both areas.
Thursday, September 27, 2007
--buyers group, K.C.Flowers & Co. back out of the deal --ho far can J.P. Morgan Chase and BOA push their own agenda without being snared in litigation. --Doubts have been swirling around the deal for months, but the drama came to a head yesterday as UBS AG infomed a group of bankers that he wasn't prepared to pay the price --two material changes a. legislation is against its business - but Mr. Flowers praised the mertis of the deal to investors after the legislation came out of light. b.oveall economic environment is unfavorable
Wednesday, September 26, 2007
--One element of the underlying philosophy of these principles is the arm's-length nature of transactions in the "wholesale" market. Each party, then, looks after its own interests, as expressed in the following passage. --Absent a written agreement or an applicable statute, rule or regulation that states affirmative obligations to the contrary, a Participant should assume that each counterparty deals at arm's length for its own account. A Participant should not treat or construe communications (whether written or oral and including ideas or suggestions regarding potential transactions) from another Participant as recommendations or investment advice and should not rely on them as such.
--Orders fell, raising concern that business invesment will soften --Demand drop -4.9% vs -4.0% expectation --companies may decide to rein in spending after the meltdown in subprime lending sent financial markets reeling in August, dimming growth prospects --one bright spot in the report was that unfilled orders for capital equipment rose 1.2 percent, suggesting manufactures had enough of a backlog to keep production liens busy in coming months
Tuesday, September 25, 2007
--Foreign-exchange trading rose 65percent to a record $3.2 trillion a day on average, led bygrowth in hedge funds and foreign investors, the Bank for International Settlements said in its triennial survey. --At the same time, hedgefund assets have risen to a record $1.76 trillion, according toChicago-based Hedge Fund Research Inc. --Transactions involving hedge funds, pension funds, mutualfunds and insurance companies rose to 40 percent of all trades,from 33 percent in 2004, said the BIS, which was formed in 1930and acts as a central bank for the world's monetary authorities.``Algorithmic'' trading, or those managed by computer programs,also spurred growth and increased the speed of trades, accordingto the report. --The U.S. dollar, which fell to a record low against theeuro of $1.4154 today, lost market share. It was involved inabout 86 percent of daily trading, down from almost 89 percent. --The Chinese yuan and the Indian rupee posted the fastestgrowth in global currency trading in the past three years as theeconomies of the world's two most populous nations expanded.Average daily trade in India's currency and related derivativessurged almost fivefold to $34 billion, from $7 billion in 2004.In China, volume grew ninefold to $9 billion. -- The Australian and New Zealand dollars gained market shareas they attracted so-called carry trades. The Australian dollarwas involved in 6.7 percent of daily turnover, up from 5.5percent in 2004 while New Zealand's share rose to 1.9 percentfrom 1 percent. -- The U.K. also dominated the over-the-counter derivativesmarket, accounting for almost 43 percent of worldwide sales,followed by the U.S. with about 24 percent. The derivatives market has expanded 71 percent since 2004,rising to $2.1 trillion a day, the BIS said. Cross-currencyswaps were the fastest-growing segment, almost tripling, astraders hedged foreign-currency bonds. Derivatives are contractswhose value is derived from stocks, bonds, loans, currencies andcommodities, or linked to specific events such as changes ininterest rates.
--housing market will take a another leg down because the imbalance of supply and demand will put downward pressure on prices --existing home inventory rose to 4.58 mil and it will take 10 months to clear out based on current sale pace
--Though global economic fallout from the U.S. subprime-mortgage crisis is likely to be protracted, govenrments shouldn't rush to regulate everything --Threat to financial stability increased largely because of uncertainty over how credit problems are transmitted globally and how deeply the credit crunch will bite around the world --In good times, the complexity of the financial system helps spread risk among institutions and countries -- lessening the possibility that any one sector will be battered. --In bad times, this complexity makes it hard to figure out where problems will materialize --IMF is trying to help prevent future crisis by highlighting potential problems ahead of time. --The new element in the glboal economy is the complexity of the financial system, such as MBS.
Sunday, September 23, 2007
--The beginning year is recessionary in U.S. --A long expansion followed in US and many developed countries ex Japan --Three major dislocations (94 Mexician currency crisis, 97 Asian financial crisis, 98 Russian default) --2001 is recessionary in U.S. --2002 to 2004 was recovery phase
So why is the market still fragile? To start with, less than 10% of the $100 billion or so of losses expected from reckless subprime lending have been recognized. Even if the U.S. housing market doesn't deteriorate further, that overhang suggests a steady stream of salvos directed at still jittery markets. And thanks to the interlinked nature of modern global finance, the actual losses are likely to keep popping up in unexpected places. Another run on a bank in another part of the world could get everybody ducking for cover again. There are also two big macroeconomic risks - repricing and inflation First, there is a housing-led recession, as loan defaults provoke foreclosures, driving prices down. The Fed's actions haven't removed that possibility. Meanwhile, the bad news of the last two months has forced companies across the world to start planning for the possibility of an economic slow-down. The risk is that recession-planning could become self-fulfilling. If it does, a wide range of asset prices could resume their downward lurch. That would cause further losses by highly-indebted institutions like hedge funds, more dumping of assets at distressed prices and more credit jitters. Second, inflation could perk up. Bond markets are already getting worried that the Fed's aggressive interest-rate cut could have that effect. America's continued reliance on borrowing money from the rest of the world to finance its huge current account deficit makes the dollar vulnerable. If there's a buyers' strike by international investors worried about U.S. inflation, the greenback's graceful fall could turn into a rout.
Saturday, September 22, 2007
--Politics. We have a dysfunctional political system in the sense that there are very serious prloblems out there, most importantly Medicare. --When baby boom retires, we are going to have to either raise taxes very sharply or cut social benefits by half. Yet, no politician wants to confront this.
--Alan Greenspan' memoir arrives with remarkable timing for two reasons. --One is that at a time like this, with financial markets in a upheaval, we yearn for guidance from the oracle who presided over 18 years of relative peace and prosperity in the U.S. economy. --the second is that a wave of revisionist thinking holds that the reign of Greespan may not have been so great after all, that bears some responsibility for the twin bubbles of dot-com mania and the recently deflated housing boom.
Friday, September 21, 2007
--BOE was give sole responsibility for setting interest rate in 1997, losing the responsibility of surpervising individuals banks to Financial Services Authority (FSA). --But it retained a role of maintaining stability of financial system --Both BOE and FSA work with British Treasury through a Tripartite Standing Committee in dealing with financial crisis.
Tuesday, September 18, 2007
--Fed cut rates aggresively to stay ahead of curve forestalling negative effects brought by credit crunch and housing marke slump --Fed's balancing act shows that it will err on the side of fanning inflation rather than restrain economic growth --Bernanke can not pegged as a cautious, one-step-at-one-time technocrat --He slaped his own face by flip-floping his decision to leave Fed rate intact just one month ago --In response to the crys from financial market, Bernanke is selling the 'Benanke put'
--50 bps cut --economic growth was moderate during the first half of the year, but the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally. The (rate cut) action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time --readings on core inflation has improved modestly this year --development in the financial markets since the committee's last regular meeting has increased the uncertainty surrounding in economic outlook.
--drivers: equity underwriting a.corporate takover $100 bil deals, up 11% b.equity underwriting, $5.5 bil deals, up 35% --concerns, $26 bill LBO loan commitment, 115% --FI capital market recorded substantial valuation reduction, most significantly on leveraged loan commitments and residential mortgage-related positions. offset by valuation gains on economic hedges and other liabilities, resulting in net reduction of $700 mil. --Invesment banking divers: record advisory net revenues (doubled to $425 mil) as well as equity originiation (62% to $296 mil) --Investment Management up 32% to $802 mil ( driven by private investmenet management net revenues 30% to $334 mil)
Wednesday, September 12, 2007
--spike in the survey for global risk recession reflects the continuing turmoil in housing market and spillover to credit market, coumpounded by disappointed employment number --two major factors economists consider are housing market and spillover to broader economy. If you are gloomy about housing market and believe its has more to go, it is hard to be optimistic. Furthermore, if believe credit market has yet to settle down or have another down leg, impacting banking lending, you will be pessimistic about economy.
--it maintained Tuesday's better tone into wednesday in spite of a touch of uncertainty creeping into equity market caused by the surpise resignation of Japan prime minister and fire of Russian prime minister by Putin --though banking liquidity issues begin to abate, real economy worries begin to raise their heads. --although we have seen some stablization in money market, the level of key indicators remain still elevated, far from out of the woods at this stage --
--GM sold 51% of controlling stake of GMAC to Cerberus Capital last year --GMAC replace its exisiting two-year term $10 bil credit line with a one year $21.4 bil one --financial support from Citi allows GMAC to expand market share after subprime-mortgage crisis knock out more than 100 home-loan mortgage lenders --ResCap is one of GMAC residential mortgage unit (9th largest US mortgage lender with $41 bil in new loans), injected with money from GMAC last money
Monday, September 10, 2007
--credit market turbulence made all money market investors leery of commercial paper, especially ABCP. --Part of the shock stems from the conventional investor wisdom that SIVs were safe havens to park cash. They have traditionally been viewed as prime vehicles, and rated as such, and differ from other blind investment pools such as collateralized loan obligations or collateralized debt obligations because SIV investors are first in line to be paid if the loans in the pool declared bankruptcy. That made SIV investors feel even more comfortable.
Friday, September 7, 2007
--the largest warehouse lender to First Magnus Financial --it can top the Fed Home Loan Bank system --9% of its oveal loan portioflio is exposed to subprime mortgages ($20 bi) --WaMu made the higheset proportion of loans to real-estate investors or second home buyers
--cut 4k jobs, first time in 4 years --July and June payrolls were revised downward to 68k and 69k respectively, instead of 92k and 69k --clear sign taht the deepening housing recession and credit market turmoil are hurting the wider economy --manufactuer, builders, and government lead the drop
Thursday, September 6, 2007
--Europe --Half of the $1.2 trillion in subprime mortgage-backedsecurities sold in the last two years were bought by investors inEurope and Asia, according to Brian Bethune, director of financialeconomics for Globe Insight Inc. in Waltham, Massachusetts. Thebonds are held by hedge funds, pension funds, banks and privateinvestors. --Another proof: ECB pumped $350 bil, three times more than US, to their banks --Most banks in Europe sell CDS, long riks --APCP from overseas increased at a faster pace in 2005 and 2006 than US did
--Germany's biggest lender will be European invesetmetn bank most affceted by FI markets rout. according to JP Morgan Analyst --50% revenue comes from FI sales and trading --take hit from mark-to-market wrtiedowns on leveraged loans --report comes on the heel of downgrade by Leh Brothers
Wednesday, September 5, 2007
--Though recent distress in financial markets has "deepened" the housing slump, the overall economy has seen little impact so far, the U.S. Federal Reserve said Wednesday. --consumer spending saw "modest to moderate increases" --auto sales was slow or subdued in most regions --employment "at least modest" gains --wage increases remain "moderate or steady"
--on the hook for $29 billion if short term funding dries up for four conduits --four conduits are of a type that has just 10% of holdings in home loans --the chance of all four conduits hurt the company is low --the earnings from conduits acccount for only 1% of SS earnings while the losses will dent net income by only 8%
Tuesday, September 4, 2007
--the combination of softness in the housing market and the contraction of credit market have put a dent on consumer confidence and job market. --If not corrected right away, the deterioration of the situation will self-reinforcing and result in recession. --white knight warriors will be business sector and governmetent. Today's ISM will give us an early indicator of how well U.S business investment is faring. If business spending tanks, we are heading for recession.
Monday, September 3, 2007
最近一段时间里，国际石油价格暴涨，伦敦-华尔街轴心众口一辞，都说是中国经济发展惹的祸，无非是要挑起世人对中国的不满，掩盖石油暴涨是为了刺激美元需求这个事实。结果谣言不攻自破，为了中期选举，硬是放了一颗一夜之间发现了“特大油田”的卫星。这与1973年他们策划让石油涨价400%从而刺激美元需求，同时将油价暴涨的责任嫁祸于中东国家的石油禁运如出一辄。 由于美元泛滥的无法避免的本质，很快，中东核问题又会升温，伊朗战争最终将无法避免，以色列动手也好，美国出手也罢，总之是激惹伊朗用水雷或导弹封锁了霍尔木兹海峡，切断世界2/3的石油通道，于是石油价格会轻易冲上100美元大关，世界对美元的需求又会大增，这次罪魁祸首是伊朗。只要世人不要对美元发行产生“不健康”的联想就好。 从20世纪70年代黄金遭到“软禁”开始，世界证券市场和大宗商品市场呈现出反向关系。大宗商品市场极为火暴的70年代，也正是证券市场表现奇差的10 年。从80年代初开始的证券市场18年大牛市，则代表着大宗商品市场熊气弥漫的时代。而从2001年开始，大宗商品市场开始了牛气冲天的征途，与此同时，股市、债市、房地产、金融衍生市场也同步狂长。表面上看是美元资产增值，实际上是债务美元的爆炸性扩张所致，而所有的债务必须支付利息，这种债务以利滚利的方式膨胀的结果必然是，原来只需要大宗商品或证券市场中的一个水缸增加容量，就能够消化过剩的美元，而现在，当所有的水缸都被泛滥成灾的美元装满后，还要往外溢出。 问题是到哪里去找这么大的水缸呢？于是华尔街的天才们又开始谈论金融衍生市场的无限容量概念。他们不断地推出成百上千的新的“金融产品”，不仅在货币、债券、商品、股指、信用、利率等方面动脑筋，更是异想天开地创造出像天气赌博这样的新玩意儿。从理论上讲，他们可以把未来一年中每一天的好坏都贴上美元标签卖到市场上来，他们同样可以将世界未来100年的每一天的每一个小时，甚至每一分钟的地震、火山、水灾、旱灾、虫灾、流行感冒、交通事故、婚丧嫁娶都做成“金融衍生产品”，明码实价地在金融市场上交易。从这个意义上讲，金融衍生市场的确是“无可限量”。只是这种论调听起来多少有点像1999 年IT泡沫登峰造极时，华尔街分析家们信誓旦旦地说要为地球上每一粒沙子分配一个IP地址。同样是这些人的祖先在“南海泡沫”时代，还曾发愁世界的金钱太多，没有好的项目来投资，于是有人提出抽干红海的海水看看埃及法老王追逐摩西和犹太人时，到底有多少金银财宝葬身海底。 当人们已经“高烧”到这种温度时，金融风暴就已经近在咫尺了。 黄金这个长期和系统地被妖魔化为“野蛮的遗迹”的货币“真龙天子”，如同一个饱经沧桑历尽磨难的智者，他并不急于张扬，他只是冷眼旁观。夫为不争，天下莫能与之争。诋毁，嘲笑，打压，咒骂，讽刺，当“伪货币皇帝”耍尽一切手段后，黄金仍然金光灿灿，而“强势的美元”则早已成强弩之末。 人民终于看出些门道了。 其实，在中国人的心目中，从来不乏对真实财富的直觉。人们称和钱有关的活动为“金”融，储放财富的所在叫“银”行，货真价实的东西为“真金白银”。当世界人民再度认识到债务货币的本质只不过就是一张欠条+许诺，所谓美元财富只是“一个被超级夸大的白条”和“对财富的无限许诺”而已，这些债务白条从来就是永远贬值的，而贬值的快慢取决于印刷它们的人的贪婪程度。完全不懂金融的普罗大众，最终将会用他们的直觉和常识去选择存放他们辛勤汗水所创造的财富的“诺亚方舟”—黄金和白银。用金融衍生工具“武装到牙齿”的国际银行家，最终将遭遇“人民战争的汪洋大海”。 倔强而持续上涨的黄金价格将会无情地推高美国长期债务利率，由于国际银行家们向金融市场兜售了数十万亿美元的“利率保险”合同，保证长期利率不会上涨，一旦长期债务利率出现被金价逼着走高的局面，国际银行家们将会被暴露在他们自身的贪婪所营造的极度风险之中。 最先被黄金持续上涨戳破的将是金融衍生产品市场的弄潮儿—“利率掉期”这个74万亿美元(仅仅是美国商业银行所申报的数据)的超级大泡泡。手中资金只有3.5%的政府特许机构们的情势将危如垒卵，黄金价格的猛扑，来得如此突然而猛烈，国债利率波动将异常剧烈和集中，政府特许机构脆弱的利率对冲防线将率先被突破，高达4万亿美元的政府特许机构短期债券会在“几个小时，最多几天”的时间内完全丧失流动性，同时陷入困境的还有摩根大通，这个金融衍生市场和黄金衍生市场“霸盘生意”的超级玩主，试图压制黄金价格和长期利率的操盘手。 率先崩盘的金融衍生市场将产生前所未有的流动性恐慌，当惊恐万状的世界投资者一起试图将手中的各种“保险合同”抛售变现时，所有这些衍生品的生长基地：货币、债券、商品、石油、股票将同时遭到“电击”，国际金融市场将爆发更大规模的流动性恐慌。为了拯救已不可救药的金融市场废墟，美联储势必如黄河决堤一般地增发美元来“抗洪救灾”，当数十万亿增发的美元如海啸一般冲向世界经济体系时，世界经济将陷入一片混乱。 国际银行家蓄谋废除黄金货币之后仅仅30多年，美国就已经透支了世界80%的储蓄。到今天，美国必须每天继续从世界各国人民的身上“吸血”20 亿美元的储蓄才能使美国这部“经济永动机”继续运转，美国的债务和利息增加的速度早已远远超过了世界经济的增长能力。当所有国家真金白银的“过剩储蓄”都被抽光之日，也就是世界金融崩溃之时。这一天的到来，其实已不是会不会的问题，而是何时以何种方式发生的问题。 貌似庞然大物的美元泡沫体系，其致命的死穴就在信心二字，而黄金则是点中这一命门的“一阳指”。
--Barclays has been forced to draw on money from bank facilities recently because SIV-lites it arranged with clients were in trouble. --Barclays' risk will be hedged at the cost of investors in the fund and the fund itself, Diamond says. "We had no obligation," --The market has worried that Barclays would be forced to bail out the Cairn vehicle and at least three other so-called SIV lites that it had set up for clients. But Diamond insists that Barclays' exposure is no more than about $150 million. Rating agency Standard & Poor's agrees, saying: "Liquidity lines provided by Barclays cover only a small proportion of the outstanding commercial paper." --SIV-Lites are the latest structured finance vehicles to hit the market, combining aspects of both CDO and SIV technologies. --So what is driving this (SIV-lite) development? Edward Cahill, European head of CDOs at Barclays Capital in London, says his desk is focusing on SIV-Lites because traditional SIVs are not as profitable as they used to be. "The reality of the market is that spreads have tightened, so traditional SIV structures, with a very thick 10% BBB tranche and then commercial paper (CP) above it, don't work. I think it would be very difficult to start an SIV from scratch right now," he says. --So what distinguishes an SIV from a CDO? Greg Drennan, London-based vice-president of Morgan Stanley's CDO structuring team, explains that there are two fundamental differences between the two vehicles: "SIVs have a cheaper cost of financing because they can raise money in the CP market with limited liquidity. The second difference is the operating company-type characteristics an SIV has." --Unlike a CDO, an SIV is an ongoing open-ended vehicle; it can change size and re-finance. "SIVs can increase or decrease leverage on a daily basis," says Cian Chandler, European structured finance analyst at Standard & Poor's in London. Also, unlike those CDOs that are funded through the CP market, SIVs do not have to be backed up with a full liquidity facility. Before a closed-end CDO that funds through CP can achieve good credit ratings on its notes, liquidity agreements with banks have to be in place. --There are other key differences between an SIV and an SIV-Lite. "SIV-Lites are much more highly levered than the traditional SIVs," notes Edward Reardon, a London-based structured finance analyst with JP Morgan. A traditional SIV will generally offer investors 12 to 16 times leverage, but SIV-Lites have equity leverage of 40 to 70 times, depending on the collateral. http://www.risk.net/public/showPage.html?page=328506
Sunday, September 2, 2007
--Supply ground to a near halt in the U.S. junk-bond market in August, declining 96% to $245 million from last August's $7.1 billion, according to Dealogic. For as long as Dealogic has kept data, since 1995, supply has never dipped this low in the U.S. high-yield market -- even in January 1995 supply was more than twice that high, at $685 million. --In the safer investment-grade corporate-bond market, volumes more than doubled to more than $36 billion in August from last year's $16.1 billion.