Thursday, January 31, 2008

$ 146 Billion - And Counting.......

Nice graph from the NYT. Í think the real number is much higher. Allianz / Dresdner has announced write offs over $ 1.5 billion during the past few weeks and hasn´t made it to the list. On top of this IKB & Sachsen LB would each have topped Bear Sterns in the ranking ...But with all the news hitting the wires on every hour it is almost impossible to catch every buck.

Die reale Nummer an Abschreibungen liegt sicher deutlich höher. Man bedenke nur das alleine die Allianz dank der Dresdner Bank Abschreibungen von einer knappen Mrd € avisiert hat und es nicht auf diese Liste geschafft hat. Man betrachte nur die besonders aus deutscher Sicht unsäglichen Vorfälle der IKB & Sachsen LB, die jeder für sich ausgereicht hätten um den Sprung vor z.B. Bear Stearns zu schaffen......Bei den ganzen Einschlägen die fast stündlich irgendwo vermeldet werden ist es aber auch unmöglich alle $ miteinzubeziehen.

Back of the Envelope

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Housing Meltdown / Business Week Cover Story

You gotta give them credit for being one of the first major media outlets that had predicted some kind of trouble brewing in the housing market. Here are some examples of their earlier track record. If you don´t want to digg through the entire 5 page long lead story i suggest to skip through the slide shows ( see one example below ). I think that most of the stuff isn´t really news to reader of this blog but it is at least a good and short summary.

Man muß Business Week mal ausdrücklich ein dickes Lob aussprechen. Sie waren einer der ersten bedeutenden großen Medieninstitutionen die zeitig auf das kommende Unheil hingewiesen haben. Zum Beweis kann man hier einige Beispiele einsehen. Wenn Ihr keine Muße habt Euch durch den langen Leitartikel zu kämpfen empfehle ich alternativ sich durch die Slideshows zu klicken. Exemplarisch habe ich weiter unten ein Beispiel herausgepickt. Obwohl das Meiste dürfte den Lesern des Blogs nicht wirklich neu erscheinen so ergeben sich doch eine schöne Zusammenfassung und wagen einen wie ich finde einigermaßen realistischen Ausblick.


Housing Meltdown / Why home prices could drop 25% more on average before the market finally hits bottom Full Business Week Cover Story

Analyzing the Housing Crisis Slide Show

The 25% Dissolution Slide Show

Housing Prices Shed Gains Slide Show

Coast To Coast
A 20% decline in home prices would wipe out all of the home equity of two-thirds of all people who bought houses in the last year, Zillow.com estimates. The bars show the percentage of recent buyers in each market whose home equity would be wiped out by a further 20% price decline.

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Wednesday, January 30, 2008

Housing Bubble / Dave Girtsman

Here comes a brilliant housing bubble video from Dave Girtsman ENJOY!

Hier ein mehr sehr treffendes Bubble Video von Dave Girtsman. Viel Spaß!



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S&P Lowers or May Cut $534 Billion of Subprime Debt

Looks like the rating agencies have finally updated their model for subprime.... Next stop Monolines ( see MBIA: Another morning, another monoline crisis… or Open Letter On Bond Insurer Transparency From A Short Seller. )....

Es sieht so aus als wenn zumindest im Bereich Subprime die Schadensmodelle der Ratingagneturen endlich in der Realität angekommen sind.... Nächster Halt dürften dann wohl die Kreditversicherer sein ( siehe MBIA: Another morning, another monoline crisis… oder Open Letter On Bond Insurer Transparency From A Short Seller. )......

This comment from Calculated Risk sums it up

Dieser Kommentar von Calculated Risk faßt das Ausmaß wunderbar zusammen
According to the Fed Flow of Funds report, household have $10.4 rillion in mortgage debt. S&P's announcement today alone is for about 5% of that debt.

Jan. 30 (Bloomberg ) -- Standard & Poor's said it cut or may reduce ratings of $534 billion of subprime-mortgage securities and collateralized debt obligations, as home loan defaults rise.

The downgrades may extend losses at the world's banks to more than $265 billion and have a ``ripple impact'' on the broader financial markets, S&P said.

The securities represent $270.1 billion, or 47 percent, of subprime mortgage bonds rated between January 2006 and June 2007, S&P said today in a statement. The New York-based ratings company also said it may cut 572 CDOs valued at $263.9 billion.

The downgrades may increase losses at European, Asian and U.S. regional banks, credit unions and the 12 Federal Home Loan Banks, S&P said. Many of those institutions haven't written down their subprime holdings to reflect their market values and these downgrades may force their hands, S&P said.

``It is difficult to predict the magnitude of any such effect, but we believe it will have implications for trading revenues, general business activity, and liquidity for the banks,'' S&P said. The ratings company will start reviewing its rankings for some banks, especially those that ``are thinly capitalized.''

S&P downgraded $50.1 billion of subprime-mortgage securities, none rated higher than A+. More than 69 percent of the AAA rated subprime securities from 2006 and 46 percent from the first half of 2007 were placed on review.

Didn't See It
``This one, I didn't see coming,'' said Mark Adelson a consultant at Adelson & Jacob Consulting LLC in New York, and a former asset-backed bond analyst at Nomura Securities.

Some of the largest global banks have already taken ``significant'' losses and they aren't likely to have more writedowns, S&P said.

Under accounting rules, many smaller banks haven't been required to write down their holdings until the credit ratings fell, enabling them to avoid the losses that have crippled Citigroup Inc., Merrill Lynch & Co. and UBS AG. The world's largest banks have reported losses exceeding $133 billion related to mortgages, CDOs and leveraged loans.

``If you're holding a AAA piece and it's now downgraded to AA, you might have to write it down, even if you're holding it for an investment,'' Gary Gordon, a bank stock analyst at Portales Partners LLC in New York, said. ``The longer it goes on and the higher the credit rating of the instrument downgraded, the wider the pain.''

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Tuesday, January 29, 2008

UBS: $14 Billion in Mortgage Write Downs

What a mess. Seems their 8 week old forecast was $ 4 billion too low. Lets hope the $ 12 billion capital injection from Singapour & the Middle East at fire sale prices will be still enough after the next forecast is hitting the tape..... I think the image as a rock solid Swiss banking giant is now gone and it will take a very long time to bring the once almost perfect reputation back. I assume that this debacle will also infect the much more important wealth management division. A break up is more than likely....

Was für ein Debakel. Sieht so aus als wenn die 8 Wochen alte Prognose mal eben um satte 40% oder $ 4 Mrd verfehlt worden ist. Bleibt die vage Hoffnung das die 12 Mrd $ Kapitalspritzen aus Singapur und dem mittleren Osten auch noch nach der nächsten Prognose immer noch ausreichend sind....... Der Ruf als solide schweizer Bankenadresse dürfte auf Jahre hinaus vernichtet worden sein. Ich kann mir kaum vorstellen das dieses Disaster ohne Auswirkungen auf die Vermögensverwaltung ( die mit abstand wichtigste Sparte ) bleiben wird. UBS wird wohl in der jetzigen Form die nächsten Jahre kaum überstehen.

FT Alphaville UBS, Europe’s largest bank by assets, reported a record loss after about $14bn of writedowns on assets infected by subprime mortgages in the US, reports Bloomberg on Wednesday.The fourth-quarter net loss of 12.5bn Swiss francs ($11.4bn) will result in a full-year loss of about CHF4.4bn, the Zurich-based bank said in a statement on Wednesday.
UBS posted its first annual loss since the company was created through a merger a decade ago, and the Q4 loss was bigger than the record declines reported earlier this month by Citigroup and Merrill Lynch. The collapse of the US subprime mortgage market has led to more than $130bn of losses and markdowns at securities firms and banks since June, notes Bloomberg.

UBS reported about $12bn of losses directly linked to the subprime market and an additional $2bn for positions related to the US residential market. The company said its Tier 1 capital ratio, a measure of financial strength, was 8.8 per cent as of December 31, reported Bloomberg.
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The Rise of Pawn Shops and Fringe Banking

This is probably one of the very few sectors in the US financial system with a very bright future.....Hat tip to Minyanville for digging this from the FT

Das Geschäft der Pfandleihhäuser dürfte eines der wenigen Sektoren im US Finanzsystem mit glänzenden Zukunftsperspektiven sein.... Dank geht an Minyanville für das ausgraben dieser Geschichte der FT.


US pawnbrokers benefit from hard times FT
Hard times in the US are benefiting pawnbrokers as beleaguered consumers pledge jewels, electronics and other goods in return for loans with interest rates running as high as 300 per cent a year.

Dave Adelman, president of the National Pawnbrokers Association, said the number of loans at US pawn shops had risen 15-20 per cent since October. He attributed the increase to rising fuel prices and deteriorating economic conditions – an assessment echoed by other industry executives.

“Brief and shallow downturns in the economy may benefit our business model,” said Daniel Feehan, chief executive of Cash America, the biggest US pawnbroker chain, with 942 locations. ( Cash America Presentation )

> Probably no coincident that they have entered the UK market in mid 2007....

> Sicher kein Zufall das die Mitte 2007 in den UK Markt eingetreten sind......

Pawnbrokers offer loans in return for personal items. Customers can buy back their property for the value of the loan plus a fee, which works out to an interest rate that can reach 300 per cent on an annualised basis, according to the NPA. If borrowers do not pay off the loan in a given time, the unredeemed item can be sold.

> Here comes the definition from "Cash Advance " & "Pawn" via Cash America
> Hier die Definition der Begriffe vie Cash America


Cash America said on Thursday its profits had risen 21 per cent to $26.3m in the fourth quarter, reflecting higher sales of pawned goods and more loans.

Alan Fishbein of the Consumer Federation of America said pawnbrokers and other “fringe” banking operations – such as those making loans against future pay cheques or car titles – had grown as banks had withdrawn from poorer areas. About $48bn in payday loans are made every year and the revenues in the whole fringe banking industry are an estimated $12bn-$15bn, according to Dennis Telzrow, a consumer finance analyst at Stephens, an investment bank.

An estimated 10m US households are thought to be outside the banking system, according to the Federal Deposit Insurance Corporation. The NPA estimates there are 12,000 to 14,000 pawnbroker shops in the US.

On Manhattan’s 47th Street, the New York block through which about 90 per cent of US diamonds are sourced, some merchants report a sharp uptick in the amount of jewellery being brought in for sale.

“Its real sad – they don’t want to sell,” said Ruben, a 52-year-old street hawker who buys jewellery from passers-by in the diamond district.

“They might have paid $150,000 for a necklace but they will get back $25,000 or $30,000 at most. But it’s either that or lose their house.”

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Monday, January 28, 2008

60 Minutes Legitimizes Walking Away

I have borrowed the headline 60 Minutes Legitimizes Walking Away from Mish. He has also some more thoughts on this topic ( read also The Business of Walking Away ) . Also a hat tip to my friends from Housing Doom for digging the Youtube version. I hope this clip shows especially the European visitors how bleak the reality looks like and why we are still in the beginning of this painful process of the "correction". Lots of Germans ( including Landesbanker like West LB , Sachsen LB, IKB etc.) can´t understand that it is possible to just "walk away" from the house without facing consequences for the rest of their lifetime like here in Germany.

Dank geht an Mish für die "geborgte" Überschrift die eine ganz neue Dynamik in den "Anpassungsprozeß" der US Immobilienkrise bringen wird . Hier weitere Gedanken von Mish The Business of Walking Away . Zudem dank an Housing Doom für das aufstöbern der Youtube Version.

Nur zur Erläuterung muß erklärt werden das anders als in Deutschland die Haftungen in großen Teilen der USA und insbesondere in den Hochburgen wie Kalifornien bei einer Zwangsvollstreckung komplett anders als zum Beispiel in Deutschland gestaltet sind. Dort wird nur mit der Immobilie gehaftet. Das ist gleichbedeutend damit das selbst wenn die Immobile unter den Hammer kommt und die Bank wie momentan üblich gigantische Verluste macht der Schuldner nicht für diesen Verlust einzustehen hat.

Praktisch, oder?

Würde mal tippen, das auch dieses Neuland für die Manager der Landesbanken ist ( siehe Sachsen LB, West LB , IKB usw ) Sinnvollerweise haben die Verantwortlichen oftmals gleich die ganze Bank aufs Spiel gesetzt um auch ja genug US Hypothekenpapiere zu erwerben.....

So kommt es vor das zum Beispiel wenn ein Haus auf der gegenüberliegenden Straßenseite für 300.000 $ zum Verkauf steht und man für sein eigenes Objekt mit 400.000 $ in der Kreide steht ( Eigenkapital war ja zum Glück dank der wahnwitzigen Finanzierungen in den letzten Jahren aus der Mode gekommen ) es nur logisch ist das neue Objekt zu erwerben und das andere in die Zwangsvollstreckung gehen zu lassen. Der damit ruinierte Creditscore sollte bei dieser Ersparniss nicht weiter ins Gewicht fallen. Noch besser wird es wenn man es sogar geschafft hat während Zeiten steigender Immopreise die Refinanzierungskeule zu schwingen und siene Immobilien mit immer neuen Hypotheken zu belasten. Welch gigantische Ausmaße das ganze in der Verganheit angenommen hat zeigt eindrucksvoll dieser Chart.

Schweizer Ansichten von meinen geschätzen Bloggerkollegen gibt es auf
Zeitenwende




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Thursday, January 24, 2008

Have A Nice Weekend

Posting will be light until Monday. I suggest to read The Great Private Equity Cash Robbery of 2007 from one of my favourite bloggers Jeff Matthews and the excellent summary from FT Alphaville on monolines The bond insurers, a $200bn problem and Wilbur Ross

Werde bis Anfang nächster Woche wohl nicht zum bloggen kommen. Kann bis dahin jedem wärmstens The Great Private Equity Cash Robbery of 2007 von einem meiner liebsten Blogger Jeff Matthews empfehlen sowie die erstklassige Zusammenfassung von FT Alphaville zum Thema der Anleiheversicherer The bond insurers, a $200bn problem and Wilbur Ross

Enjoy Cramer vs Santelli ! A must see!!


Here are some thoughts on the "stimulus plan"....

Nachfolgend ein paar Gedanken zum gefeierten Plan zur Stimulierung der US Wirtschaft.....

Thanks to John Darkow

Hat tip to Matt Davis

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Wednesday, January 23, 2008

Societe Generale reports $7.1 bln trading loss from "fraud"

ice internal risk management...... In the end this is probably good news. ( You know that times are really bad when an € 5.5 billion capital infusion at fire sale prices is been widely seen as good news.....) There were rumors crashing the stock and the entire sector that they would have a big write down. But this write down seems (at least that´s what i hope) to be company specific. And some still wonder why banks don´t trust each other.......Probably the most important part is that SocGen is starting to write down some insurance from monolines and from a total of € 550 mio and only € 50 mio is coming from ACA! ( watch page 10 on the presentation )

Nette Risikokontrolle..... Unterm Strich dürfte das aber trotzdem für eine große Erleichterung sorgen ( Der Umstand das eine massive Kaitalspritze von üver 5,5 Mrd € zu Ausverkaufspreisen als gute Nachricht angesehen wird sagt eigentlch schon alles aus...). Speziell in den letzten beiden Tagen hat das Gerücht um eine riesige Abschreibung den ganzen Sektor zerlegt. Das die Abschreibung jetzt größtenteils nur auf einen "Betrug" und damit hoffentlich nur isoliert zu betrachten ist sollte beruhigen. Relativ gesehen natürlich....Kein Wunder das die Banken sich gegenseitig nicht über den Weg trauen..... Ein interessanterter Aspekt ist das auch SocGen damit angefangen ist wertlose Versicherung der Monolines abzuschreiben ( von den 550 Mio stammen lediglich 50 Mio von ACA / Details auf Seite 10 der Präsentation) . Passend zum Thema hier ein Ranking vom Spiegel über die größten Fehlspekulanten Börsenschwindler, Seiltänzer, Hochstapler

You cannot make this up. FT Alphaville is reporting that Societe General has won the award for the " Best Equity Derivatives House" .....

Das ist wirklich kaum zu toppen. FT Alphaville berichtet das ausgerechnet Societe General den Preis fpr das "Beste Derivatehaus für Aktien" gewonnen hat.

“We managed the existing book very well because we decided some time before the crisis to be long volatility and be less sensitive to correlation, so the losses were minimal. We suffered on our statistical arbitrage trading activity, but that was just for one month, and minimal compared to some hedge funds or other banks. Overall, our trading activities will be approximately flat compared to last year, which is a good performance,”

Qutote: Christophe Mianne, SG CIB’s head of market activities, covering equity, derivatives, fixed income, currency and commodities in Paris

Make sure you read the Societe General Presentation for some more interesting details !

Empfehle die Societe General Präsentation für die mehr als interessanten Details zu lesen !


Live blogging the SocGen conference call via FT Alphaville

Marketwatch
French bank Societe Generale loss after an "exceptional fraud" committed by someone who usually trades plain-vanilla and European stock index futures.

It also said it was taking a 2.05 billion euro write-down, with 1.1 billion euros coming from U.S. residential property, 550 million euros coming from the U.S. bond insurers and 400 million euros in additional subprime-related risks. It will earn between 600 million and 800 million euros for the year.

The board rejected the resignation of CEO Daniel Bouton. It's going to issue 5.5 billion euros in preferred securities to J.P. Morgan and Morgan Stanley to boost its capital

The story is reminding of
Nick Leeson & Barings

Erinnert mich irgendwie stark an
Nick Leeson & Barings

Here is a good take from Barry Ritholtz Fed's Folly: Fooled by Flawed Futures? suggesting ( i think correctly ) that this poor trader has lead to the emergency cut

Hier eine wie ich finde zutrefende Einschätzung von Barry Ritholtz Fed's Folly: Fooled by Flawed Futures? der unterstellt das dieser durchgeknallte Trader es geschafft hat Bernanke zum größten Notzinsschritt seit Jahrzehnten zu bewegengrößten Notzinsschritt


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Tuesday, January 22, 2008

Alan Bernanke.......

It took the Fed only one quarter to reverse almost 50 percent of the past 2 years of rate increases. But this is what happens when all your models are so out of touch with reality & you are ignoring your duty for oversight. I think if there will be any rate increases in the distant future they will start with well telegraphed measured 0,125 % steps...... I assume that it is more likely that Elvis is still alive than that the Fed will ever orchestrate an emergency rate hike..... Unfortunately i havn´t found a broker that is willing to accept that bet :-) The next question will be if the Greenbag is on its way to become the new currency for the next wave of carry trades.....

Die Fed hat binnen eines Quartals bis Ende Januar vermutlich die Hälfte ihrer Zinserhöhungen zurückgenommen für die sie in ihrem mühseligen Normalisierungsprozess ( 0,25% Schritte ) zwei Jahre gebraucht hat. Eine echt reife Leistung. Das ist aber wohl der Preis dafür das man vollkommen an der Realität vorbeilebt und sich nach Modellen richtet die aus der Steinzeit stammen. Zudem hätte ein Großteil des Wahnsinns vermieden werden können wenn die Fed Ihrer Aufsichtspflicht nachgekommen wäre und die meisten der durchgeknallten Darlehensfinanzierungen nicht durchgewunken hätte. Ich befürchte schon jetzt das sich die Fed im nächsten Zinserhöhungszyklus (irgendwann in 10 Jahren) zu gewaltigen Zinsschritten von 0,125% entschließen wird.... Zudem ist wohl wahrscheinlicher das Elvis lebt als das die Fed jemals eine ausserplanmäige Zinserhöhung initiieren wird.. Leider haben ich noch kein Wettbüro gefunden das diese Wette entgegennimmt..... :-) Die nächste Etappe wird wohl sein das der Greenback die neue Carry Trade Währung werden könnte....

From panic to penicillin - Bernanke, blogged Ft Alphaville

Less Than Respectful Commentary on the Fed Put and Fiscal Rescue Efforts Naked Capitalism

Five Things You Need to Know: Emergency Rate Cut, What It Means and What to Do Minyanville

Greenspan Put Is Dead. Long Live Greenspan Put: Caroline Baum Bloomberg

The Fed Blinked: Now, What? Herb Greenberg

Bernanke Blinks
Mish

Desperate measures Economist

Es riecht nach Verzweiflung FT Deutschland

Time to remember this great chart from Minyanville showing how stupid the case "Don´t fight the Fed" is...

Höchste Zeit sich den wunderbaren Chart von Minyanville anzusehen der einmal mehr eine angebliche Börsenweisheit "Don´t fight the Fed" entzaubert.....

Lots of the mess can be blamed on Greenspan but as shown in this excellent piece The Education of Ben Bernanke from the NYT ( Hat tip to Hellasious from Sudden Debt ) i doubt that Bernanke would have done much differently.... Especially after the latest actions......

Sicher kann ein Großteil des aktuellen Unheils Greenspan angelastet werden aber dieser großartige Bericht The Education of Ben Bernanke der NYT ( Dank an Hellasious von Sudden Debt zeigt eindeutig das Bernanke wohl ganz ähnlich gehandelt hätte ( siehe Aktion gestern ) .......

Bernanke is also firmly opposed to the notion that central banks should raise rates to prick bubbles in the stock market or elsewhere. In a paper written at the height of the dot-com mania, in late 1999, Bernanke and his friend Gertler argued that it is virtually impossible to identify a bubble before it pops.....

Bernanke made a small contribution to a problem that would blossom in a big way on his watch. In the aftermath of the 2001 recession, inflation was at its lowest level in decades. Though consumer prices were rising, Bernanke feared a possible bout of deflation — the potentially devastating phenomenon in which prices drop, leading to lessened business activity and then still lower prices and so forth. This occurred during the Depression and also in Japan in the 1990s. Bernanke’s argument provided a major element of support to Greenspan for keeping interest rates low

But as a goldbug/bull you gotta love these guys......

Aber als Goldbulle muß man solche Typen einfach lieben.....

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Monday, January 21, 2008

Revisiting The Cover Story Indicator

Time to revisit the Cover Story Indicator from June 2007 when one of the leading German magazine had its cover story how to get rich with stocks.

Höchste Zeit sich mal dem sog. Cover Story Indicator aus dem letzten Juni zuzuwenden als der Focus vollkommen untypisch plötzlich auf den Aktienzug aufgesprungen ist.

Looking at the DAX chart it seems the indicator has once again worked. Nice timing
Wenn man sich den DAX Chart seitdem ansieht muß man den Redakteuren für Ihr großartiges Timing gratulieren......

With stories like Stock Drop Pulls 38 Indexes Into Bear Market; Banks Lead Plunge i think the next related stock cover will look less rosy... I´ll keep you updated and maybe at the time they will once again work as a good indicator.... But i have the feeling that this point isn´t just around the corner....
Nachdem Schlagzeilen wie diese Stock Drop Pulls 38 Indexes Into Bear Market; Banks Lead Plunge Wirklichkeit sind dürfte das nächste Börsenbezogene Cover wohl gänzlich anders ausfallen. Evtl. markiert ja auch dieses den Wendepunkt . Diesesmal dann zum Besseren.... Befürchte bloß das dies noch einige Zeit auf sich warten lassen dürfte.
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Sunday, January 20, 2008

More German Bailouts Under Way ... West LB Needs At Least € 2 billion

What a surprise...... Düsseldorf seems to be the capital of banking incompetence in Germany. West LB & IKB two of the biggest casualties have their headquarter located there. Unlike in the US we don´t need the Petro or Sovereign Wealth Fund Dollars. We have the German taxpayer on the hook once again for the West LB who is in different ways owned through several state or municipal entities ( see West LB Factsheet ). If you add Sachsen LB to the bailout list we are easily at amounts that exceed € 10 billion taxpayers money and this exposure is still rising......

Welch Überraschung........ Düsseldorf ist unzweifelhalft die Hauptstadt in Sachen deutscher Bankeninkompetenz. Neben der West LB hat auch die IKB haben dort Ihren Hauptsitz. Während die US Banken um Petro $ und Staatsfons buhlen muß können sich diese Institute der Hilfe des deutschen Steuerzahlers sicher sein. Wenn man jetzt die Sachsen LB hinzuzieht bewegen wir uns jetzt schon locker im zweistelligen Mrdbereich an fehlgeleiteter Steuergelder die der Inkompetenz, dem Größenwahn einiger Provinzbänker und einer komplett überforderten Aufsicht (Aufsichtsrat, Bafin, Ministerium usw) geschuldet sind. Dummerweise ist das noch lange nicht das Ende der Fahnenstange.....

The entire debacle is becoming a real joke when you review their slogan when it comes to the problem sector SIV/conduits that is causing the largest part ( on top of trading losses, bad debt etc ) of the problem ( see WestLB, HSH Nordbank Bail Out $15 Billion of SIVs )...."Premier Structured Finance House - Our Core business" ....

Das ganze wird schon fast wieder komisch wenn man sich den Slogan der gerade den problembehafteten Sektor in den Worten der Wets LB beschreibt ( siehe WestLB, HSH Nordbank Bail Out $15 Billion of SIVs ) "Premier Structured Finance House - Our Core Business"

On top of this the biggest Landesbank the LBBW is also eating losses of around € 1.7 billion related to subprime and SIV/conduits. But they are at least strong enough to survive this without new capital.

Die Meldung das die LBBW ebenfalls 1,7 Mrd an Abschreibungen im Zusammenhang mit Ihrem Ausflug in die schöne neue Welt der ausserbilanzlichen Zweckgemeinschaften & US Hypotheken verloren hat sollte zumindest am Rande erwähnt werden. Immer verkraften die das ohne neue Hilfe des Steuerzahlers. Bleibt zu hoffen das dies auch zukünftig so bleiben wird

Quote December West LB related to the SIV / Zitat Dezember West LB

“We are also convinced that the assets that Kestrel and Harrier have could be more highly valued, but that the market is not ready for that.”

WestLB Expects EU1 Billion Loss for 2007, Will Raise Capital Bloomberg

West LB’s “non-permanent” writedowns FT Alphaville

WestLB ringt um frisches Kapital FT

Der West LB droht ein Milliardenverlust FAZ



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Time For Another Greenspan Book......

Coming soon......... If you can stand more from Greenspan click here . I assume the only reason why several companies like Pimco, Deutsche & Co have signed him up is to bet against his view..... ;-) . I also suggest to read this very funny piece A possible addition to Greenspan's client list from Caroline Baum via Tim.

Dürfte wohl sehr bald erscheinen..... Wenn Ihr mehr vom angeblich größten Notenbänker aller Zeiten vertragen könnt empfehlen ich diesen Link . Der einzige Grund warum Firmen wie Pimco, Deutsche & Co AG angeheuert haben dürfte wohl die Überlegung sein um gegen seine "Expertenmeinung" zu wetten..... ;-) . Zudem kann ich diesen löstlichen Link A possible addition to Greenspan's client list von Caroline Baum via Tim ans Herz legen.

Have a nice weekend

Allen ein schönes Wochenende

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Thursday, January 17, 2008

"Wall Street Finest" Or Bring Back Blodget........

They are sounding like the homebuilder analysts 18 month ago, the banking analysts 6 month ago etc..... Amazing how out of touch with reality these so called "experts" are. Lets hope they have tied their compensation to the accuracy of their forecasts.... :-) Sometimes it´s better to leave the spreadsheet, don´t take the comments from Management as granted and just visit main street......

Eriunnert mich irgendwie an die Analysten die vor 18 Monaten Homebuilder oder bis vor 6 Monaten zum Einstieg bei den billigen Banken geblasen haben.... Es ist erschütternd wie fern jeglicher Realität diese sog. "Experten" agieren. Bleibt zu hoffen das deren Bezahlung an die Prognosequalität gekoppelt ist.... :-) Evtl. sollten die sich von Ihren Tabellen mal in die reale Welt bewegen und nicht jedes Wort was das notorisch optimistische Management in der Märchenstunden der Telefonkonferenz erklärt sofort für bare Münze nehmen..

With Recession Looming, Tech Profit Ests Look Too High Barron´s Tech Tradder Talk

If we’re heading into a recession - and it sure looks like we are - then tech companies can’t possibly avoid feeling some pain. Unfortunately, the Street’s tech analysts have yet to fully bake a downturn into their estimates.

In his Technology Focus newsletter this morning, Cowen & Co.’s Arnie Berman notes that heading into fourth quarter earnings, the consensus tech estimates seem out of synch with the notion that 2008 is going to be a more difficult environment than 2007:

  • Heading into the Q4 reporting season, he notes, the Street was expecting 91% of all tech companies to grow their top lines in 2008, up from 71% in 2007 versus 2006.

  • The Street estimates suggest 89% of tech companies with have higher margins in 2008 than 2007, up from 48% who grew margins in 2007 from 2006.

  • The aggregate earnings of the nearly 400 companies Berman tracks will rise
    21% in 2008, according to Street estimates, up from 14%-15% growth in 2007 and 2006.

“Have Wall Street technology analysts been too busy creating their 2008 financial projections to read the newspaper? No,” writes Berman. “However, we do believe that circumstances will require that they reduce their current revenue forecasts. Even if the global economy does not slow substantially in 2008, the uncertain macro context all but assures that technology budgets will be spent in a more back-end loaded fashion. Given the uncertain and potentially difficult backdrop, we doubt that nearly as many companies will want to forecast rising margins and accelerating profit growth as Wall Street consensus forecasts suggest is likely.”

And by the way: Berman sees one other related risk. “If technology companies try to balance a desire to offer ‘common sense guidance’ with a desire to reassure a very jittery investment community, the risk of multiple estimate reductions through 2008 will be heightened,” he writes.

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Merrill Lynch & Financial Guarantors & Counterparty Risk....

Besides the $ 14.6 billion write down i want to highlight this topic in the release..... When watching MBIA, AMBAC & Co ( see Downgrades ahead: monolines still don’t have enough cash &MBIA, Ambac Tumble, Default Risk Soars After Losses ) i assume the next wave of massive write downs in almost every other bank balance sheet should be coming very soon.... This is to my knowledge the first release from a major institution that views lots of the insurance as "worthless". Unfortunatley they don´t say from wich company thy bought the guarantee ( maybe ACA ? / Update : It´s ACA) . I think we can thank the new CEO for coming clean on this issue. Other will have to follow ....

Neben den 14,6 Mrd Abschreibungen verbirgt sich u.a. auch die nachfolgende Passage in der Veröffentlichung von Merrill . Und das ist eine mit erheblichen Sprenpotential........ Wenn man sich den freien Fall von MBIA, AMBAC & Co ( siehe Downgrades ahead: monolines still don’t have enough cash & MBIA, Ambac Tumble, Default Risk Soars After Losses ) ansieht dürfte hier die nächste gigantische Abschreibungswelle in Stein gemeißelt sein. Der hierfür verantwortliche Versicherer ist ACA ... Das ist meinem Kennnisstand die erste große Bank die klipp und klar sagt das eiin Großteil der abgeschlosenen Absicherung im Prinzip wertlos ist. Ohne neuen CEO wäre das so deutlich sicher nicht gesagt worden. Denke das die anderen nun kaum glaubhaft einen anderen Standpunkt vetreten können.

Merrill Lynch Eranings Report Financial Guarantors:
During the fourth quarter, credit valuation adjustments related to the firm’s hedges with financial guarantors were negative $3.1 billion, including negative $2.6 billion related to U.S. super senior ABS CDOs.

These amounts reflect the write down of the firm’s current exposure to a non-investment grade counterparty from which the firm had purchased hedges covering a range of asset classes including U.S. super senior ABS CDOs. Please see attachment VIII for details of related exposures.

Live-Blogging the Merrill Earnings Call via the WSJ

Adding up Merrill’s $16.7bn writedowns FT Alphaville

Cramer on Monolines Is this really Cramer? This is one of the very rare times he makes sense....MUST SEE!

WSJ on Counterparty Risk

S&P: Bond Insurance Losses Likely Much Higher Calculated Risk

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SIVs don’t rollover, they die

Bring on the fire sales ...This should be very bad news for banks that have sponsored these off balance sheet vehicles with funding guarantees...... If they want to avoid the fire sales they need strong balance sheets to shoulder the reintegration..... Ask Citigroup ,IKB , Sachsen LB & Co ....... Once again a big hat tip to FT Alpahville ( see Blogroll )

Notverkäufe ohne Ende..... Das sollte besonders für die Banken unangenehm werden die gr´ßzügig Finanzierungsgarantien für diese Vehikel ausserhalb der Bilanz gegeben haben. Um einen Notverkauf zu verhindern hilft nur noch diese Papiere in die eigenen Bilanzen zu nehmen...... Fraglich ob alle Bilanzen stark genug siind um das zu schultern.....Fragt mal bei der Citigroup, IKB , Sachsen LB usw nach .....Einmal mehr ein dickes Lob an FT Alphaville ( siehe Blogroll)

SIVs don’t rollover, they die FT Alphaville

A quick update on the troubled SIV sector.

The average NAV (net asset value - a ratio of asset-worth to notes after leverage) for SIVs is now hovering just above the 50 per cent mark. According to Moody’s:

A vehicle’s net asset value of capital (NAV) is computed as the difference between the market value of its asset portfolio and the notional outstanding of its senior liabilities, expressed as a percentage of paid-in capital. NAV evolution since 2002 is shown in Chart 2. Sector NAV was above par for most of this period, falling below par in early August 2007 and then declining precipitously to 53% on November 30.


An average NAV that low is very worrying - since in generic SIV structuring terms, a fall below 50 per cent triggers a mandatory and immediate liquidation of the portfolio. Most SIVs are already in defeasance - having broken their “early warning” triggers (NAV at 75 per cent, for example). Moody’s again:

NAVs vary from SIV to SIV primarily as a function of portfolio composition. While SIVs and SIV-lites with relatively large concentrations of Non-Prime US RMBS and ABS CDOs show NAVs below 50%, vehicles with no subprime or ABS CDO exposures have NAVs that are closer to 77% as shown in Table 3. The ongoing liquidity crisis has however demonstrated that NAVs can be affected by spread widening in sectors that are not directly related to US subprime mortgages; thus, vehicles with currently high NAVs may also see sharp declines as contagion spreads across different segments of the credit markets.

(It’s disturbing to note that Moody’s are expecting contagion to spread with some certainty.)

> :-)!

For some SIVs, even a NAV at 53 per cent looks attractive (again via Moody’s):

Today’s rating action is prompted by the decline of Duke Funding’s capital net asset value from 21% on November 23rd 2007 to below zero on January 11th 2008.

This followed the declaration of an Event of Default by Duke Funding on December 6th, 2007. As a consequence of both the NAV decline and the occurrence of an Event of Default, one of the counterparties to the repurchase agreements, holding 8% of the portfolio, has exercised its right to liquidate assets. The remaining four counterparties, holding 92% of the portfolio, have agreed to forebear such liquidation rights on a temporary basis.

We’re now looking at a swift - and potentially market wide - liquidation of SIV portfolios. Possibly along Duke Funding lines. Low NAVs coupled with a spike in maturing SIV debt this January will likely make SIV sponsors - mostly banks - cave into the inevitable and call time. Banks simply can’t afford to keep on rolling-over SIV debt.

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Wednesday, January 16, 2008

Brace yourselves: S&P adjusts risk models

This is big big news! It was about time..... Big hat tip to FT Alphaville for bringing this up!

Wurde auch höchste Zeit..... Großen Dank mal wieder an FT Alphaville für das hervorkramen dieser wirklich weitreichenden News!


Brace yourselves: S&P adjusts risk models
Late last night, rating agency Standard & Poor’s did some quiet housekeeping.

In a late press release, S&P announced it was adjusting its cumulative loss measure on 2006 subprime collateral to 19 per cent - up from 14 per cent:

We revised our expected losses for the 2006 vintage subprime collateral to 19% from 14%, as delinquencies continue to rise, and we will recalculate lifetime loss expectations for all vintages of U.S. RMBS. Additional losses are projected to result directly for the additional delinquencies and defaults.

The press release is somewhat anodyne, but the implications of that tweak are disturbing:

It will mean huge new downgrades on CDO tranches from the 2005 vintage through to 2007 - the majority of the market, in other words.

We suspect this will push hundreds more CDOs through “events of default” and a significant number into liquidation - a likely repeat of the disastrous events in November and December, when CDOs went into meltdown and banks were forced to admit further humiliating writedowns.

S&P are also altering their metrics; RMBS rating models will now apply the adjusted cumulative loss measure over the lifetime of the structures they rate - not just (as has hitherto been the case) over a 36-month period. That will likely make senior CDO investors more keen to liquidate deals: super senior swap holders, or AAA note holders in many CDOs have thus far been keen to accelerate but not liquidate the transactions on the basis that things will inevitably improve. The new model suggests they wont: controlling note holders now have every incentive to exit fast.

The crisis won’t just be restricted to CDOs. Any structure containing RMBS will suffer; SIVs, ABCP conduits, even plain old securitisations.

And it might be the final nail in the coffin for the monolines - MBIA and Ambac. Both have maintained their crucial AAA issuer ratings by the skin of their teeth, having raised $2bn each in emergency capital to act as collateral. S&P’s metric readjustment means that the monoline stress-test they performed is now outmoded and over-optimistic.

What remains to be seen now is when those calculations will feed through into a cataract of rating actions.

> Speaking of AMBAC.......

Ambac Will Cut Dividend, Raise $1 Billion to Preserve Rating

Jan. 16 (Bloomberg) -- Ambac Financial Group Inc., the second-largest bond insurer, will slash its dividend 67 percent and raise more than $1 billion in new capital to preserve its AAA credit rating.

Chief Executive Officer Robert Genader will leave the company, New York-based Ambac said today in a statement distributed by Business Wire. Ambac will reduce the value of securities it guarantees by as much as $3.5 billion. The quarterly dividend will be cut to 7 cents a share from 21 cents.

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Tuesday, January 15, 2008

Hypo Real Estate Crashing 35%...CEO "We Did A Fantastic Job"......

It does not often happen that a member of the main German index DAX is crashing 35 percent within minutes. Well, yesterday Hypo Real Estate which concentrates on commercial real estate did just that..... One reason was the "surprising" write down on cdo´s..... Surprising indeed! On top of this i´m pretty sure the desasterous conference call with an incompetent management team didn´t help either.... When the CEO is praising his team and is telling the listeners that they have done a ( Quote) "fantastic job" they deserve every percent of the slump...

Es passiert nicht oft das ein DAX Titel mal eben 35% innerhalb weniger Minuten verliert. Hypo Real Estate ist dies in grandioser Weise gelungen....Einer der Gründe war die "überraschende" Abschreibung auf den 1,5 Mrd hohen CDO Bestand..... Wenig hilfreich war sicher auch der blamable Auftritt des gesamten Managementteams während der Telefonkonferenz ... Man ist fassungslos wenn der Boss sich und sein Managementteam damit lobt das Sie einen ( ZITAT!) "Super Job gemacht haben".... Finde Sie sind mit nur 35 % noch glimpflich davon gekommen....

They are lucky that they have historically a strong business base ( 40 % ) in Germany. But as you might expect they have broadened their base and have now a exposure of roughly 25% in the riskiest markets ( 9% US, 12% UK, 4% Spain). And they are already talking about new opportunuties in the US. They would love to finance what they describe as "bargains" on 5th avenue from sellers that are under pressure to refinance like Macklowe or 666 Fifth Avenue . Lets hope that todays bargains won´t look like trophy buildings in hindsight

Also nice to see that they are highlighting their very strong business in 2007.... It remains to be seen if this won´t backfire very very soon......

Die können von Glück reden das die historisch bedingt noch immer einen großen Anteil (40%) in Deutschland machen. Wie nicht anders zu erwarten hat aber auch die HRE Ihr Glück im Ausland gesucht und bestreitet jetzt ca 25% in den riskantesten Märkten ( 9% US, 12% UK, 4% Spanien). Nettes timing.... Zudem sieht das Management weiter große Möglichkietn gerade in den USA und ist in konkreten Gesprächen vermeintliche Schnäppchen zum Beispiel an der 5th Avenue von in Problemen geratenen Verkäufern wie Macklowe oder 666 Fifth Avenue zu finanzieren. Bleibt zu hoffen das die vermeintlcihen Schnäppchen sich rückblickend auch als solche erweisen.....

Ich denke das der als besonders positiv hervorgehobene Geschäftsverlauf in Sachen Neugeschäft von 2007 sich sehr bald als Bumerang erweisen wird...


HRE Presentation

Looking at the low impairments taken i´ll bet that the next write down is almost guaranteed.... But management has treid to insure that the 400 mio writedown were conservative and the future risks to the downside is limited..... But this was the same in November when they took only a 4 mio charge......

Wenn man sich die meiner Meinung nach viel zu niedrigen Abschreibungen ansieht gehe ich jede Wette ein das die nächste Abschreibung schon sehr bald kommen wird. Das Management hat versucht die 400 Mio Abschreibung als Konservativ darzustellen die weiteres Abwärtpotential vorwegnehmen. Leider haben die ähnliches bei der letzten Abschreibung von leduglich 4 Mio Ende 2007 auch gesagt......

I´m pretty sure it doesn´t take long and the rating agencies will slash the rating....

Dürfte nicht lange dauern und die Ratingagenturen werden den Daumen sicher senken...


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Citigroup Still With $ 37.3 Subprime Exposure.....

I think it is interesting to read the Citigroup Results in detail. Make sure you see this Excellent Presentation. Lots of data. I have put the focus on subprime exposure and credit costs. Lets hope their internal models for valuing these securities has improved during the past 2 quarters ( UPDATE & hat tip via Calculated Risk"Citi is basing their CDO loss forecasts on house price decline of about 7% each for each of the next two years")...... But i think with the new CEO in charge there is hope that they are now more realistic. He normally has no incentive to underestimate. But after all i have seen from this company ...... Here are my earlier takes on Citigroup and here the details to the $14.5 billion of capital infusion. Nice to see that they are still paying a dividend ...... What a farce!

Ich denke es lohnt sich die Citigroup Results im Detail durchzulesen. Kann jedem diese excellente Präsentation ans Herz legen. Haufenweise Infos die ein Bild geben was in den einzelnen Märkten so vor sich geht. Ich habe hier setllvertretend mal die Zahlen zu Subprime und den explosierenden Kreditkosten herausgepickt. Bleibt zu hoffen das die internen Modelle auf denen die Wertermittlungen basieren in den letzten 6 Monaten besser geworden sind ( Update & Dank an Calculated Risk "Citi is basing their CDO loss forecasts on house price decline of about 7% each for each of the next two years )...... Mit dem neuen CEO an Bord bestehet aber zumindest die Hoffnung das man jetzt näher an der Realität ist. Üblicherweise neigt der neue CEO dazu bei der ersetn Ergebnisveröffentlichung unter eigener Verantwortung klar Tisch zu machen. Aber nach allem was ich bisher von diesem Unternehmen gesehen habe....... Hier meine früheren "Gedanken" in Sachen Citigroup. Zusätzlich hier die Details zur $ 14.5 Mrd Kapitalspritze. Lächerlich das im gleichen Atemzug noch immer eine Dividende gezahlt wird.....


Sildes taken from the Excellent Presentation

Credit costs increased $5.41 billion, primarily driven by an increase in net credit losses of $1.56 billion and a net charge of $3.85 billion to increase loan loss reserves.

-- U.S. consumer credit costs increased $4.1 billion, comprised of $689 million in higher net credit losses and a net charge of $3.31 billion to increase loan loss reserves. The $3.31 billion net charge compares to a net reserve release of $127 million in the prior-year period.

The increase in credit costs primarily reflected a weakening of leading credit indicators, including increased delinquencies on 1st and 2nd mortgages, unsecured personal loans, credit cards, and auto loans. Credit costs increased also due to trends in the U.S. macroeconomic environment, including the housing market downturn, and portfolio growth.

UPDATE: Here are some more links with very good insights / Hier einige andere gute Link mit meiner Meinung nach guten Meinungen

Citi Dividend, Future Prospects and Credit Cards Calculated Risk

Live-Blogging the Citigroup Earnings Call WSJ

Cost of Capital "Ratchets Up" at Citigroup and Merrill Mish

Citi confirms $18bn Q4 writedown; signs of consumer stress FT Alphaville

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