Tuesday, September 30, 2008

Just In Time For Q3 Earnings....SEC Gives Banks More Leeway On Mark-To-Market

Surprise, surprise...... Probably the worst they can do to restore confidence..... Desperation......

Passenderweise noch rechtzeitig um die Bilanzen für das 3. Quartal noch künstlich zu frisieren..... Glaube kaum das diese Bilanzakrobatik dazu beiträgt das Vertrauen in Bankenbilanzen zu stärken..... Klingt einmal mehr nach einer weiteren Verzweiflungsaktion.....

SEC gives banks more leeway on mark-to-market Reuters
"This letter (SEC document) could be titled, pick a number, any number, as it gives bankers great leeway in choosing what numbers they will give to investors," said Lynn Turner, who served as chief accountant at the SEC from 1998 through 2001
More Mark-to-Market Quotes via Calculated Risk. Barry Ritholtz has an excellent summary Understanding the Significance of Mark-to-Market Accounting. Floyd Norris from the NYT has also some thoughts on this topic Fair Value Follies & S.E.C. Move May Relax Asset Rule

Mehr zu diesem Thema via Calculated Risk Mark-to-Market Quotes und Barry Ritholtz macht nocheinmal mehr als deutlich warum diese Bilanzierungmethodik so wichtig ist Understanding the Significance of Mark-to-Market Accounting. Darüberhinaus hat sich Floyd Norris von der NYT Fair Value Follies & S.E.C. Move May Relax Asset Rule zum Thema seine Gedanken gemacht

But i fear that this is only the beginning......Take a look at Paulsons Magic Marker hidden in his bailout plan. You don´t have be a genius to assume that this "tool" will be used not very "conservatively"....

Befürchte das dies erst der Anfang ist.... Inmitten des vorerst gescheiterten Bailout Plans verbirgt sich nachfolge Passage.... Man muß kein Hellseher sein das dieses "Werkzeug" inflationär angwendet werden wird...... via Paulsons Magic Marker Ft Alphaville

Section 132. Authority to Suspend Mark-to-Market Accounting.Restates the Securities and Exchange Commission’s authority to suspend the application of Statement Number 157 of the Financial Accounting Standards Board if the SEC determines that it is in the public interest and protects investors.

Once more via Barry Ritholtz Quote of the Day: Fair Value Accounting

Wachovia went out with a book value of $75 billion. Citi paid $2 billion. Could it be that asset values are overstated, not understated?

-Michael Rapoport, Dow Jones


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Friday, September 26, 2008

"Awkward Loan Interview" Daily Show On Paulson & Bernanke

This sums it up.... Unfortunately shows on Comedy Central offer better insights than so called "Business TV" like CNBC......

Besser als jede Wirtschaftssendung...... Traurig aber wahr!



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Wednesday, September 24, 2008

Jeff Matthews Is Asking The Obvious & Right Question

Thanks Jeff !

Diese Frage von Jeff bring das ganze Debakel auf den Punkt.

Jeff Matthews " The “Oracle” Speaks: Listen Up, Hank

More seriously, we wonder this: how is it that Warren Buffett can cut a better deal with the best-run financial company in America than the U.S. Treasury can ask from the worst-run financial companies in America?

>Everybody that still hasn´t gotten behind the idea that is the real agenda from Paulson & Bernanke should read ths piece from Naked Capitalism

> Jeder der noch immer nicht begriffen hat worum es in Wirklichkeit bei dem Rettungspaket geht lege ich diese Zusammenfassung von Naked Capitalism an Herz

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"Debt To America!" Daily Show

AMEN!



The Word - OhMyGodSocietyIsCollapsing...


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Tuesday, September 23, 2008

Feds Announce Plan To Inject $300 Million Into Beanie Babies Market

As i´ve said over and over again the best way to withstand the daily nonsense from politics, SEC ( see drug-plan administrator Express Scripts was added to the (do not) short list of financial stocks ) central banks and Wall Street is a good dose of humor...... Here comes a brilliant piece from Zac Bissonnette via Blogging Stocks

Wie ich bereits mehrfach geschrieben habe läßt sich der tagtägliche Wahnsinn von Politik , Aufsicht ( siehe ( drug-plan administrator Express Scripts ( vergleichbar mit Celesio )was added to the (do not) short list of financial stocks ), Notenbanken nur mit einer guten Prise Humor ertragen. In diesem Sinne folgt eine leider treffende Satire von Zac Bissonnette via Blogging Stocks
Feds Announce Plan To Inject $300 Million Into Beanie Babies Market
With prices of TY's Beanie Babies trading well off the highs they reached toward the end of the last millennium, Treasury Secretary Hank Paulson announced that the administration will inject $300 million into the market with open-market purchases on eBay, and at flea markets, garage sales and thrift shops.

In a statement, Federal Reserve Chairman Ben Bernanke told reporters that officials "recognize and acknowledge that the immediate cost to taxpayers is substantial, but we believe that this is a necessary move to shore up confidence in the secondary market for plush animals, and going forward, anticipate that this measure will deliver long-term value to taxpayers as the market bounces back."

In anticipation of the announcement, Morgan Stanley CEO John Mack has been buying up depressed stuffed animals including Seaweed the Seal, Peanut the Royal Blue Elephant, Harry the Hampster and Runner the Mongoose. He told analysts on a conference call that as the federal cash infusion shores up the market, the bank will be able to report mark to market gains that will improve its capital position and reduce the need for further dilution of shareholders.

In a related story, some mutual funds are calling on the government to impose strict penalties on schoolyard bullies who make fun of kids for playing Pokemon cards, suggesting that the taunting adds fuel to an already volatile market.

Full Disclosure: Nothing in this post is true.

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Monday, September 22, 2008

Number Of The Day "Stock Buybacks From Financials In 2007"

They really deserve the bailout........Sarcasm off....... At least Lehman has gone gone bust. There is no way i can hide my SCHADENFREUDE when reviewing their buyback orgy ( see I Want My Buyback Back....Lehman Edition )

Wer so sorgsam mit seinen Geldern hausgehalten hat verdient jeden noch so großen Bailout...... Immerhin hat es Lehman erwischt. Die haben sich in den vergangenen Jahren eine Aktienrückkauforgie der ganz besonderenArt geleistet ( siehe I Want My Buyback Back....Lehman Edition ). Ich probiere erst gar nicht meine Schadenfreude und Genugtuung darüber zu verbergen...... Ein aus deutscher Sicht besonders tragisches Beispiel an den Irrglauben des Aktienrückkaufes spielt sich gerade in Real Time bei Daimler ab ( I Want My Buyback Back.....Daimler Is Doubling Down Again ). Es bereitet fast körperliche Schmerzen mitanzusehen wie die einst gesunde Kapitalstruktur im Angesicht einer auf Jahre hinaus furchtbaren Automobilkonjunktur ohne Not durch den Schredder gedreht wird......


Marketbeat WSJ
Stock buybacks peaked in the third quarter of 2007, according to Howard Silverblatt, senior index analyst at Standard & Poor’s. Nearly $172 billion in shares were repurchased in the third quarter of 2007, right around when the market peaked, contributing to the one-year record of $589 billion in shares repurchased in 2007. The biggest contributor? Financials, which accounted for 20% of the buybacks in 2007.

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Sunday, September 21, 2008

Hussman "Why On Earth Would Congress Put The U.S. Public Behind The Bondholders? "

I think we all know why........ Too bad that this minor question won´t be raised in Congress...... Should be very good news for the $ and the long term treasury yields ...... Got Gold........ ? I have to apologize for my post title Quote / Joke Of The Day ..... from last week . Should have been titled "Joke Of The Century" from the get-go....... I also recommend to read this Open Letter To Congress On The $700 Billion Paulson Bailout Plan from Mish.

Denke das inzwischen selbst der Blindeste mitbekommen hat das es bei den ganzen Eingriffen alleine darum geht bereits faktisch insolvente Banken auf Kosten der Steuerzahler "rauszuhauen". Bin mir ziemlich sicher das solch unwichtigen Details wie die Haftung der Bondanleger im US Kongress nicht weiter thematisiert werden........ Immerhin dürfte es in nicht allzu langer Zeit dazu führen das der US $ den aktuelen Status als "der Reservewährung" verlieren wird und die Finanzierungskosten der USA dramatisch steigen werden. Evtl. lassen sich ja sogar die Ratingagentuern dazu hinreissen das AAA Rating von US Schulden herunterzustufen. Spaß beiseite......Vorher wird denen sicher die Lizenz entzogen...... Got Gold....... ? Möchte mich hier für meine Postingbezeichnung Quote / Joke Of The Day ..... von letzter Woche entschuldigen . Hätte es gleich "Zitat/Witz des Jahrhunderts" betiteln sollen...... Zudem empfehle ich noch einen Blick in diesen extrem treffenden Open Letter To Congress On The $700 Billion Paulson Bailout Plan von Mish zu werfen.

Hussman In 2006, the president of the Federal Reserve Bank of St. Louis noted “Everyone knows that a policy of bailouts will increase their number.” This week, Congress is being asked to hastily consider a monstrous bailout plan on a scale nearly equivalent to the existing balance sheet of the Federal Reserve.

As an economist and investment manager, I am concerned that the plan advocated by Treasury is essentially a plan to bail out the bondholders of financial institutions that made bad lending decisions, with little help to homeowners that are actually in financial distress. It is difficult to believe that the U.S. government is contemplating taking on the bad assets of these institutions at probable taxpayer loss and effectively immunizing the bondholders (and shareholders) of these companies.

While it is certainly in the public interest to avoid the dislocations that would result from a disorderly failure of highly interconnected financial institutions, there are better ways for public funds to accomplish this, other than by protecting corporate bondholders while homeowners remain in distress. .......

These institutions are not failing because 95% of the assets have gone bad. They are failing because 5% of the assets have gone bad and they over-stretched their capital. At the heart of the problem is “gross leverage” – the ratio of total assets taken on by the company to its shareholder equity. The sequence of failures we've observed in recent months, starting with Bear Stearns, has followed almost exactly in order of their gross leverage multiples. After Bear Stearns, Fannie Mae, and Freddie Mac went into crisis, Lehman and Merrill Lynch followed. Morgan Stanley, and Hank Paulson's former employer, Goldman Sachs, remain the most leveraged companies on Wall Street, with gross leverage multiples above 20.

Look at the insolvent balance sheet again. The appropriate solution is not for the government to replace the bad assets with public money, but rather for the government to execute a receivership of the failed institution and immediately conduct a “whole bank” sale – selling the bank's assets and liabilities as a package, but ex the debt to bondholders, which preserves the ongoing business without loss to customers and counterparties, wipes out shareholder equity, and gives bondholders partial (perhaps even nearly complete) recovery with the proceeds.
The key is to recognize that for nearly all of the institutions currently at risk of failure, there exists a cushion of bondholder capital sufficient to absorb all probable losses, without any need for the public to bear the cost.
For example, consider Morgan Stanley's balance sheet as of 8/31/08. Total assets were $988.8 billion, with shareholder equity (including junior subordinated debt) of $42.1 billion, for a gross leverage ratio of 23.5. However, the company also has approximately $200 billion in long-term debt to its bondholders, primarily consisting of senior debt with an average maturity of about 6 years. Why on earth would Congress put the U.S. public behind these bondholders?
The stockholders and bondholders of the company itself should be the first to bear losses, not the public. That is the essence of what a free and fair market, and a responsible government would enforce. The investors in the companies that produced the losses should be accountable for them, and the customers and counterparties should be protected.

The case of Fannie Mae and Freddie Mac was special in that government had already provided an implicit guarantee to their bondholders, so that bailout couldn't have been done otherwise without harming the good faith and credit of the government, but it's absurd to tell Wall Street “send us your poor and your tired assets, and we will tend to them.” The gains in financial stocks we have observed in the past two days reflects money that those firms expect to be taken out of the public pocket. .....
In summary, the Treasury proposal to address current financial difficulties places corporate bondholders ahead of the public, rewards irresponsible risk-taking, and sets a precedent for future bailouts. Moreover, we know from a long history of economic experience across countries that a major expansion of government liabilities is invariably followed by multi-year periods of extremely high inflation, particularly when it is not matched by a similar expansion of economic production. Such inflation would initially be modest because of the current weakness in the economy, but could pose unusual challenges to the United States in the coming years.
Congress can benefit the American public by maintaining a focus on responsibly assisting homeowners in distress rather than defending the stockholders and bondholders of overleveraged financial companies. It is essential to recognize that the failure of these companies need not result in “financial meltdown” provided that the “good bank” representing the vast majority of assets and liabilities is cut away, protecting customers and counterparties, so that the losses are properly borne out of the capital base of the companies that incurred them.

Again, everyone knows that a policy of bailouts will increase their number. By choosing who bears the losses for irresponsible decisions at these companies, Congress will also choose the scope of the bailouts that follow.

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Thursday, September 18, 2008

CNBC Hydra Indicator........

The Daily Show rocks! A good dose of humor is the only way to withstand the "Daily Bailout Horror Show" that makes Wall Street and the US to the poster child of a Banana Republik.....

Wird Zeit das wir in Deutschland einen Ableger bekommen. Dank der KfW und etlichen anderen eigenen Skandalen dürften wir Material genug haben..... Humor ist momentan wohl der einzige Weg um den Niedergang der Wirtschaftswelt wie wir sie kannten mitzuerleben. Die tagtägliche "Bailout Horror Show" sollte dazu führen das zumindest in den USA Hammer und Sichel demnächste einen prominenten Platz auf der Flagge bekommen sollten..... Der Begriff Bananenrepublik dürfte langsam aber sicher keine Untertreibung mehr sein.....







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Wednesday, September 17, 2008

Cartoon Of The Day

No problem if you own gold....

Sollte kein Problem sein wenn man ein Freund des Goldes ist......

UPDATE via Yves from Naked Capitalism

Bernanke: "We Have Lost Control"

Really shocking.... :-)

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Tuesday, September 16, 2008

You´ve Got The Fed

Brilliant. Especially after the $85 Billion AIG Bailout from the Fed..... If this news is true Allianz, Flowers Said to Have Bid for AIG Before Fed Takeover this would create the biggest moral hazard so far..... Looks like post from Monday was spot on A.I.G. Seeks $40 Billion in Fed Aid to Survive.... Only $ 45 billion short...... :-)

Genial! Nach dem $85 Billion AIG Bailout der Fed zudem passender denn je....Sollte diese Meldung zutreffen Allianz, Flowers Said to Have Bid for AIG Before Fed Takeover markiert das einen neuen Höhepunkt in Sachen "Moral Hazard". Sieht fast so aus als wenn mein Posting vom Anfang der Woche den Nagel auf den Kopf getroffen hatA.I.G. Seeks $40 Billion in Fed Aid to Survive Nur die Summe hat sich merkwürdigerweise mal eben mehr als verdoppelt.....



Hat tip to Naked Capitalism

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Monday, September 15, 2008

Quote / Joke Of The Day .....

Funny....... Almost a running gag......

Wirklich der beste Witz den ich in diesem Jahr gehört habe........ Denke den werden wir in nächster Zeit noch öfter zu hören bekommen.....


Paulson : Banking system is 'safe and sound'
1:48 PM ET, Sep 15, 2008

via Marketwatch

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Sunday, September 14, 2008

A.I.G. Seeks $40 Billion in Fed Aid to Survive

Forget Lehman..... I think the far bigger story is looming in the collaspe of the world biggest insurer AIG...... In a sign of total desperation they are begging the Fed to bail them out...... And with all the recent bailouts it seems only logical for AIG in trying to suck the Fed in ( on top of this it remains to be seen how much toxic waste the Fed can absorb until the balance sheet is similar to lets say a subprime lender .... And it is getting worse by the day ....see Fed Widens Collateral for Loans, Banks Set Up $70 Billion Fund )..... If AIG is failling i assume the implications for world markets would be far bigger than the Lehman BK..... If it is true that AIG had turned down the money from Private Equity and went instead to the Fed ( and would get the money ) it would create the biggest moral hazards so far....

Der Fokus sollte heute nicht auf Lehman sondern auf AIG liegen.... AIG ist bis vor kurzem der größte Versicherer weltweit gewesen und steht unmittelbar vor dem Untergang. Sollte dieses Eintreffen dürften die Schockwellen um einiges Größer sein als die Implosion der im Verhältnis zu AIG winzigen Lehman Brothers. In einem Anfall von totale Verzweiflung hat AIG offensichtlich bei der Fed um Hilfen von schlappen 40$ Mrd angefragt. Denke das dürfte der weltweit erste Fall sein in dem eine Versicherung solch einen Schritt unternimmt. Bei der bisherigen Politik der Fed ist wohl auch einen Versuch wert. Die Fed Bilanzstruktur der Fed sieht eh schon schon aus wie die eines Subprimelenders ( und verschlechtert sich weiter rapideFed Widens Collateral for Loans, Banks Set Up $70 Billion Fund ) ...... Sollte die Meldung stimmen das AIG ein Angebot von Private Equity abgelehnt hat und sich stattdessen auf die Fed verlassen hat und Bernanke & Co die Fed Bilanz für den Versicherer öffnen würde das einen erneuten Dammbruch und den bisherigen Höhepunkt in Sachen "Moral Hazard" markieren


A.I.G. Seeks $40 Billion in Fed Aid to Survive
Dealbook NYT
The American International Group is seeking a $40 billion bridge loan from the Federal Reserve, as it faces a potential downgrade from credit ratings agencies that could spell its doom, a person briefed on the matter said Sunday night.

Ratings agencies threatened to downgrade the insurance giant’s credit rating by Monday morning, allowing counterparties to withdraw capital from their contracts with the company. One person close to the firm said that if such an event occurred, A.I.G. may survive for only 48 hours to 72 hours.

Though this past weekend was convened to focus on Lehman, the Wall Street chieftains who gathered at the Federal Reserve Bank of New York also pondered a solution for A.I.G. The firm had become one of the biggest underwriters of complex debt securities known credit default swaps, used as insurance for a wide range of products, including the mortgage instruments that have been the bane of Wall Street for the past year and a half

The firm had planned to move $20 billion from its regulated insurance business to its holding company and to sell assets and a stake in the company to private equity firms. But A.I.G. has ruled out the capital shift because of the time and complexity involved.

J. C. Flowers & Company, a buyout firm focused on financial services firms, offered $8 billion for a stake in the business that would have given it an option to buy all of A.I.G. down the road. Kohlberg Kravis Roberts and TPG also said they would bid.

But all three withdrew at the last minute, citing anxiousness over the company’s precarious financial health.

> Here the different version via the WSJ

> Hier nun die Version des WSJ

AIG Scrambles to Raise Cash, Talks to Fed

During a weekend scramble to shore up its finances, AIG turned down a capital infusion from a group of private-equity firms led by J.C. Flowers & Co. because an option tied to the offer would have effectively given them control of the company, an 89-year-old giant that does business in nearly every corner of the world.

The proposed option would have allowed the firms to acquire AIG for $8 billion under certain conditions. That price is just one-fourth of AIG's current market value.

A.I.G.’s extraordinary move of reaching out to the Fed for help may spur other non-investment banks to try a similar move. Companies ranging from General Electric to GMAC have been hurting badly and would desperately love the liquidity that the Fed would provide.

Herd On The Street WSJ

For instance, applying some of Lehman's latest marks to AIG's holdings could result in at least $15 billion in additional write-downs to the insurer's residential portfolio, which has a face value of $88 billion.

How severe were Lehman's marks? Consider that even longtime bears on the stock thought the firm was finally marking its residential portfolio to realistic levels last week.

Lehman Chief Financial Officer Ian Lowitt said on the firm's investor call that the firm was marking Alt-A exposures at about 39% of face value, compared with about 63% at the end of the second quarter. Alt-A mortgages are loans given to borrowers who, while not necessarily subprime, lack documentation to verify their financial condition or other information.


Still, Lehman has thrown down a marker. At the end of June, AIG's marks on Alt-A securities were about 67%. Citigroup, meanwhile, appeared to be valuing its $16.4 billion in Alt-A exposure at just over 80 cents on the dollar.

Ft Alphaville

The fall of Lehman brothers might well lead the news this morning, but the situation for AIG is potentially more serious. Systemically speaking, AIG is a much bigger domino.

For starters, AIG has written more credit protection - via CDS - than Bear Stearns. It is, to wit, a crucial counterparty in many Wall Street firms’ hedging strategies.

Then there’s the fact that AIG is the world’s largest insurer. Trouble for AIG could pull the insurance sector into a deep and very nasty spiral and might well be the knock-out blow to ailing economies.

Nasty Details AIG 10Q FT Alphaville

..... ratings downgrades would spell huge collateral calls from counterparties on AIG’s CDS. The relevant detail is in AIG’s 10Q from June 30:.....

It is estimated that, as of the close of business on July 31, 2008, based on AIGFP’s outstanding municipal GIAs and financial derivative transactions at that date, a downgrade of AIG’s long-term senior debt ratings to ‘A1′ by Moody’s Investors Service (Moody’s) and ‘A+’ by Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (S&P), would permit counterparties to make additional calls for up to approximately $13.3 billion of collateral, while a downgrade to ‘A2′ by Moody’s and ‘A’ by S&P would permit counterparties to call for approximately $1.2 billion of additional collateral.

Click on the link to get more details on the effect of a downgrade....

Klickt bitte auf den Link um mehr Details zu den Auswirkungen der Downgrades zu erfahren....

UPDATE :

AIG “giving a bridge loan to itself.”


This is unfortuantely no joke......

Das ist leider kein Witz.......

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Thursday, September 11, 2008

Mortgage Crisis Blues

Brilliant!


Hat tip for digging out this beauty to Hedge Fund Post

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You Know That Times Are Really Bad When Even Buffet Won´t Insure The Risk.....

There is really nothing more you need to know..... I assume the death toll on the Bank Closure Map will spike very soon....

Diese Mitteilung spricht Bände......Bei der Flut an untergehenden Banken die zu erwarten sind sicher keine Überraschung.... Die Anzahl der "Todesfälle" auf der Bank Closure Map wird schon sehr kurzfristig explodieren.....


Berkshire, in Blow to Banks, Reins In Its Deposit Insurer WSJ
Warren Buffett's Berkshire Hathaway Inc. has told one of its subsidiaries to stop insuring bank deposits above the amount guaranteed by the federal government, dealing a fresh blow to the financial-services industry as it tries to assuage anxious customers.

The subsidiary, Kansas Bankers Surety Co., is notifying about 1,500 banks in more than 30 states that it will no longer offer a program called "bank deposit guaranty bonds." KBS is an 18-employee subsidiary of Berkshire Hathaway, according to the parent firm's 2007 annual report. It is one of a handful of firms that offer such insurance, a big selling point for banks trying to attract wealthy customers.

That Mr. Buffett is withdrawing from this insurance market is an indicator of how many in the industry are worried about future bank failures.

In some cases, companies that acquire failed banks will buy all the deposits, making the government insurance limits irrelevant.

But customers with large deposits can lose money if the acquiring bank doesn't take on the extra deposits. When Columbian Bank & Trust Co., of Topeka, Kan., failed Aug. 22, there were about 610 accounts with $46 million total that potentially exceeded government insurance limits, the FDIC said.

KBS insured some deposits at this bank and lost money in the failure, people familiar with the matter said. Mr. Towle declined to comment on whether the bank was a customer.

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Tuesday, September 09, 2008

Morgan Stanley Failed $ 6.5 Billion Commercial Real Estate Flip......

SCHADENFREUDE! This story rivals almost the latest CRE epsiode from Deutsche Bank ( see Deutsche Bank Is Doubling Down In Vegas..... )

SCHADENFREUDE! Das nimmt es sogar mit der letzten Episode der Deutschen Bank auf ( siehe Deutsche Bank Is Doubling Down In Vegas..... )

Morgan Stanley's Waning Crescent WSJ
Real-Estate Deal May Lead to More Write-Downs -- And Shareholder Griping
When Richard Rainwater, the renowned Texas investor, sold Crescent Real Estate Equities Co. to Morgan Stanley for $2.78 billion early last year, some Crescent shareholders complained the price was too low.

Now it looks like Morgan Stanley's shareholders are the ones who should have been griping.

Morgan Stanley, one of the largest real-estate investors among Wall Street firms, originally planned to put Crescent's office buildings, resorts, housing projects and other properties in one of the real-estate funds it manages for institutions and wealthy individuals.

But the firm decided to keep what is now $4.6 billion of assets on its balance sheet instead, exposing Morgan Stanley to potential losses. The company didn't disclose the value of the assets at the time, but the overall deal was valued at $6.5 billion, including the assumption of $3.1 billion of debt.

The reason? Morgan bought Crescent before the credit crunch hit and commercial-real-estate values started to fall. It was also before Morgan was able to launch the fund that it hoped would own the properties. That left Morgan trying to persuade investors to buy into a fund including properties with top-of-the-market prices, something Morgan was unable to do.

A Morgan Stanley spokeswoman declined to discuss Crescent. In a securities filing, the firm cited "current market conditions, valuation, size of the investment and timing of the fund" as reasons why it held onto Crescent.

'Peak-Market Price'
"It's likely that investors didn't want those properties or Morgan Stanley couldn't distribute those properties into the fund at a price that investors were willing to pay," says Cedrik Lachance, an analyst with Green Street Advisors Inc., a Newport Beach, Calif., real-estate research and trading firm. "Investors didn't want to pay the peak-market price."

Morgan Stanley marked down the value of the Crescent properties by $150 million in its fiscal second quarter ended May 31, deepening losses for its asset-management business. Additional write-downs are likely if commercial-property values keep declining.

> Click to see more details of the Cresent Portfolio.... Looking at the locations it is almost guaranteed that a massive write down is already in the cards.... But with Level 3 assets and their "unique" underlying models you never know..... :-).

> Hier geht es zum Cresent Portfolio... Alleine der Blick auf die Karte genügt um zu erkennen das die Immobilien in den zum Teil besonders überhitzten Teilen des Landes stehen. Die nächste massive Abschreibung ( und ich meine damit eine richtig schmerzhafte ) dürfte damit bereits in Stein gemeißelt sein. Obwohl man bei der ganzen Level 3 Bilanztrickserei da heutzutage nicht sicher sein kann.....


The Crescent deal is yet another example of the damage being done to Wall Street firms by their aggressive push into commercial real estate when money was easy and prices were rising. Lehman Brothers Holdings Inc. has been hammered by ill-timed investments in California land and New York City apartment buildings. Commercial banks Wachovia Corp. and Bank of America Corp. have high exposures to deteriorating construction loans.

So far, Morgan Stanley's reported real-estate losses have been relatively small. The firm has significantly reduced the amount of commercial-real-estate debt on its balance sheet without taking the sort of painful write-downs that rivals have.

Morgan Stanley made headlines late last year when a venture led by the firm bought 11,000 house lots from home builder Lennar Corp. for $525 million, about 60% less than where Lennar carried the land on its books. While that land has likely fallen further in value, Morgan Stanley isn't at risk. The firm was able in that case to put the holdings in an investor fund, according to people familiar with the matter.

Morgan Stanley has been one of the most active real-estate fund managers. As of June 30, the New York company had $96.4 billion in real-estate assets under management, according to the firm. Morgan Stanley is about to close an approximately $1.5 billion commercial-real-estate debt fund and is in the process of raising a global real-estate fund with $10 billion in targeted equity capital, according to Real Estate Alert.

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Looks Like Lehman Is Running Out Of Rumors......

But it is probably too early to count out Charly Gasparino (?)..... :-) Stock is tanking almost 40 percent....... Time for a small collection of Lehman postings from the past few months ( make sure you also read the links within the posting ) ..... Enjoy.... Congratulations to the "smart money" that bought $6 billion in common & prefered stocks ( at a bargain price of $28.....) just a few weeks ago......

UPDATE : Ahhhh... Just in time our friends from the rating agencies are waking up S&P: Lehman on CreditWatch with Negative Implications I wonder why they havn´t said a thing when Lehman was using "Enron-esque characteristics" for a tansaction to unload toxic assets ( see Lehman Needs to Come Clean About R3) .....

Aktie im freien Fall ( minus 40% ).... Höchste Zeit eine kurze Auswahl an Lehman Posting aus den letzten Monaten herauszukramen ( Ihr solltet es zudem nicht verpassen die Links in den einzelnen Postings ebenfalls mit mehr als nur einem flüchtigen Blick zu würdigen ).... Viel Spaß bei Betrachtung einer der besten "Wall Street Soaps" der letzten Monate...Richtig überraschend ist lediglich das der große Knall so lange hat auf sich warten lassen..... Lehman wird mir fehlen..... :-) Was wohl diejenigen Investoren denken die noch vor wenigen Wochen die 6 Mrd $ Kapitalerhöhung zu $28 gezeichnet haben.....

UPDATE Wie nicht anders zu erwarten reagieren unsere besonderen Freunde von den Ratingagenturen mal wieder mehr als zeitig S&P: Lehman on CreditWatch with Negative Implications ..... Man fragt sich schon wo die zum Beispiel waren als Lehman einen auf Enron gemacht hat um fragwürdige Positionen aus der Bilanz zu tilgen ( siehe Lehman Needs to Come Clean About R3) .......

The Daily Lehman Takeover Rumor....... :-)

I Want My Buyback Back....Lehman Edition

Condo Desperation.....Lehman Offers Money Back Guarantee

Finally the omnipresent Richard Bove ( "the citigroup dividend is safe"......) via FT Alphaville

This is Mr Bove’s forecasting record on Lehman this year: enthusiastic “buy” recommendations between February and April, capitulation in May, before moving to a neutral stance in June.

If the analyst believed it was a buy above $50 six months ago, it must be a screaming buy now the price has fallen 70 per cent.

DOH!!!!!

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Monday, September 08, 2008

Long-Term Capital: It’s a Short-Term Memory

Market amnesia..... The following article comes from ROGER LOWENSTEIN the author of When Genius Failed: The Rise and Fall of Long-Term Capital Management. I recommend to read the entire peace.

Manchmal könnte man wirklich meinen das der Markt an unheilbarer Amnesie leidet..... Der nachfolge Bericht kommt von ROGER LOWENSTEIN der den Bestseller When Genius Failed: The Rise and Fall of Long-Term Capital Management verfasst hat. Ich empfehle den kompletten Report zu lesen. Bleibt zu hoffen das der auch den Weg zu den Aufsichtsbehörden, Zentralbanken usw findet........


Long-Term Capital: It’s a Short-Term Memory NYT
A FINANCIAL firm borrows billions of dollars to make big bets on esoteric securities. Markets turn and the bets go sour. Overnight, the firm loses most of its money, and Wall Street suddenly shuns it. Fearing that its collapse could set off a full-scale market meltdown, the government intervenes and encourages private interests to bail it out.

The firm isn’t Bear Stearns — it was Long-Term Capital Management, the hedge fund based in Greenwich, Conn., and the rescue occurred 10 years ago this month.

AS striking as the parallel is to Bear, Long-Term Capital’s echo is far more profound. Its strategy was grounded in the notion that markets could be modeled. Thus, in August 1998, the hedge fund calculated that its daily “value at risk” — meaning the total it could lose — was only $35 million. Later that month, it dropped $550 million in a day .....

Rather than evaluate financial assets case by case, financial models rely on the notion of randomness, which has huge implications for diversification. It means two investments are safer than one, three safer than two. .....

The fund’s partners likened their disaster to a “100-year flood”— a freak event like Katrina or the Chicago Cubs winning the World Series. (The Cubs last won in 1908; right on schedule, they are in contention to repeat.) But their strategies would have lost big money this year, too.

John W. Meriwether, the fund’s founder, later organized a new fund, which suffered big losses early this year, according to press reports.

If 100-year floods visit markets every decade or so, it is because our knowledge of the cards in history’s deck keeps expanding. When perceptions change, liquidity evaporates quickly. Indeed, the belief that one can safely get out of a “liquid” market is one of the great fallacies of investing.

This lesson went unlearned. Banks like Citigroup and Merrill Lynch felt comfortable owning mortgage securities not because they knew anything about the underlying properties, but because the market for mortgages was supposedly “liquid.” Each firm would write down the value of its mortgage investments by more than $40 billion. .....

....the notion that a private hedge fund with but 16 partners and fewer than 200 employees could cause lasting harm was never truly examined. It was simply accepted.

The concept of too-big-to-fail, exceptional in 1998, is now a staple in the regulators’ playbook. Bear Stearns and, by implication, other troubled investment banks have been taken under Washington’s protective skirts; Fannie Mae and Freddie Mac, too. The Federal Deposit Insurance Corporation is pushing for easier terms for millions of homeowners; auto companies are demanding loan guarantees.

....Incredibly, six months after the Long-Term Capital affair, Mr. Greenspan called for less burdensome derivatives regulation, arguing that banks could police themselves. In the last year, he has been disproved to a fault.

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THAT ROSE, FANNIE MAE .......

Probably the ugliest & thorniest rose in the entire universe.....A good dose of humor is probably the only way to withstand the "Mother Of All Bailouts"...... I assume the next parody has something to do with a sinkhole... :-) More serious input ( with the exception of the MUST READ link at the end of this posting.... ) via Yves from Naked Capitalism Freddie, Fannie Notable Comments (Mainly Not Pretty) .

Anlässlich zur "Mutter aller Bailouts".... Ist wohl die dornigste Rose auf diesem Planeten...... :-) Mehr ernsthafte Analysen ( mit der Ausnahme weiter unten in diesem Posting... ) via Yves von Naked Capitalism Freddie, Fannie Notable Comments (Mainly Not Pretty)



Dank an Zeitenwende & Versusplus

I have to echo what Yves has to say / Kann hier Yves nur zustimmen.....
You also must read Paulson'sStatement on Freddie and Fannie with a Nearly Simultaneous Translation at Jesse's Cafe Americain. Hysterical and on target.

Update: Take A Load On Fannie


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Thursday, September 04, 2008

ECB Tightens Rules On Liquidity Facilities

You know that something was wrong when it was lucrative to dump Australian credit card paper to the ECB..... In general it will be very difficult to shut down the Pandora´s Box of the very broad collateral that all central banks have agreed to accept or at least put up a haircut that is reflecting the underlying risk adequately .... It will be very interesting to see how the central banks balance sheets will look like within a few years...... But compared to what
Chinas central bank is facing Main Bank of China Is in Need of Capital ( stunning !! ) the ECB is looking less foolish on a relative basis ......... :-) One of the reasons why i like gold....

Wenn es sich lohnt australische Kreditkartenforderungen zu verpacken und bei der EZB abzuladen wird es aber auch höchste Zeit das die Bedingungen angepasst werden..... Generell ist festzustellen das es den Zentralbanken rund um den Globus sehr schwer fallen dürfte das breite Spektrum das als Sicherheit akzeptiert wird auf ein gesundes Maß zurückzufahren bzw wirklich dem Risiko angemessenen Abschlägen zu versehen. Möchte mir lieber nicht vorstellen wie die Bilanzen der Zentralbanken in ein paar Jahren aussehen werden. Denke es ist nicht verwegen zu behaupten das sich dort ne Menge recht "zweifelhafter" Papiere wiederfinden werden...... Verglichen mit aktuellen Problemen der chinesischen Zentralbank sieht das ganze aber schon wieder halb so wild aus Main Bank of China Is in Need of Capital ..... Wirklich unfassbar! :-) Einer der der etlichen Gründe warum ich eine Goldposition im Depot für mehr als angemessen halte..... Aus der FT Deutschland EZB wird bei Sicherheiten vorsichtiger

Bank Bond Risk Soars to Five-Month High as ECB Tightens Lending
Sept. 4 (Bloomberg) -- The cost of protecting European bank bonds from default rose to the highest in five months after the European Central Bank tightened its criteria for lending.

The ECB will charge banks more to borrow by reducing the amount it lends to as little as 16.4 percent below the face value of collateral pledged, President Jean-Claude Trichet said at a press conference in Frankfurt today. Credit-default swaps on the Markit iTraxx Financial index of subordinated debt for 25 European banks and insurers jumped 12 basis points to 177, the highest since April 1, according to JPMorgan Chase & Co. prices at 6 p.m. in London.....

The ECB is changing its requirements to head off abuse by financial institutions. The ECB accepts a broader range of collateral for loans than the Federal Reserve or the Bank of England, including bonds with credit ratings five levels below AAA and asset-backed securities, prompting some firms to create bonds specifically to use as collateral to borrow from the ECB......

`Gaming the System'
ECB council member Yves Mersch said in an interview last month that the central bank is concerned that some financial institutions are ``gaming the system.''

The ECB lent 467 billion euros ($670 billion) last week to banks with operations in the 15-country euro area. Lenders in Spain have almost tripled borrowings from the Frankfurt-based ECB in the past year, the fastest increase in Europe, according to data from the countries' central banks. Spanish banks have stored up 89 billion euros of asset-backed securities to pledge as collateral, according to UniCredit SpA.

Bonds backed by mortgages and other assets accounted for 18 percent of the ECB's loan collateral at the end of 2007, up from 4 percent in 2004, Fitch Ratings data show.

Sydney-based Macquarie Group Ltd. sold bonds backed by Australian consumer loans in June through a special-purpose company in Ireland, enabling investors to use the notes as collateral to borrow from the ECB.

Haircut
The new rules on collateral, which will take effect from February, will apply a discount of 12 percent on asset-backed bonds, up from as little as 2 percent, Trichet said. Bonds that don't trade or are difficult to value will have an additional so-called haircut of 5 percent, Trichet said. The ECB will lend 5 percent less than the face value of unsecured bank bonds.....

WSJ
ECB President Jean-Claude Trichet said the changes would only affect a “small fraction” of the more than one trillion euros of assets banks submit as collateral each year. Asset-backed securities amounted to 16% of the collateral in 2007.

via the FT ( HT Naked Capitalsim )

The changes, which take effect from February 1, include increases in the average “haircuts” applied to asset-backed securities. A haircut is the amount deducted from the market value of a product when judging its value as collateral. In future, a blanket 12 per cent haircut will apply, replacing a previous sliding scale of between 2 per cent and 18 per cent. There will be penalties for asset-backed securities valued using models and for unsecured bank bonds.

Für alle illiquiden ABS nimmt die EZB künftig unabhängig von Laufzeit oder Verzinsung zunächst einen Bewertungsabschlag von 5 Prozent auf den Nominalwert vor und zieht dann zusätzlich einen Risikoabschlag (Haircut) von pauschal zwölf Prozent ab. Damit ergibt sich ein durchschnittlicher Abschlag von 16,4 Prozent. Bisher gelten für solche Papiere nur Haircuts von 2 bis 18 Prozent


The next table is taken from page 39 GUIDELINE OF THE EUROPEAN CENTRAL BANK and is shwoing the structure before yesterdays announcement

Die nachfolge Tabelle ist von Seite 39 GUIDELINE OF THE EUROPEAN CENTRAL BANK und zeigt die Aufteilung vor der gestrigen Ankündigung.
Here is the ECB release from yesterday introducing a new category

Hier nun die EZB Veröffentlichung von gestern die zudem eine neue Kategorie einführt

4 September 2008 - Biennial review of the risk control measures in Eurosystem credit operations
With regard to the risk control measures applied to marketable assets, a new liquidity category for marketable assets will be introduced (see Table 6 of the “General Documentation”). This new category IV will be composed of credit institution debt instruments (other than Jumbo and traditional covered bank bonds) that were previously part of category III. Old category IV will be renamed category V. The valuation haircuts applied to eligible marketable assets in the different liquidity categories will be as follows

* Assets in this liquidity category that are given a theoretical value (in accordance with Section 6.5 of the “General Documentation”) will be subject to an additional valuation markdown of 5%

As can be seen from the table, assets in new liquidity category V (former liquidity category IV) will be subject to a haircut of 12% regardless of their residual maturity and coupon structure. This corresponds to the level of haircuts that was previously assigned to assets in this liquidity category with a fixed coupon and a residual maturity of over ten years. Furthermore, assets in this liquidity category that are given a theoretical value (in accordance with Section 6.5 of the “General Documentation”) will be subject to an additional valuation haircut. This haircut will be applied directly to the theoretical value of the asset in the form of a valuation markdown of 5%, which corresponds to an additional haircut of 4.4%


Levels of valuation haircuts applied to eligible marketable assets in relation to fixed coupon and zero coupon instruments (percentages)
Liquidity categories
Category I Category II Category III Category IV Category V
Residual
maturity
(years)
Fixed coupon Zero coupon Fixed coupon Zero coupon Fixed coupon Zero coupon Fixed coupon Zero coupon Fixed or zero coupon
0-1 0.50.5111.51.56.56.512*
1-3 1.51.52.52.53388
3-5 2.533.544.559.510
5-7 33.54.555.5610.511
7-10 44.55.56.56.5811.513
>10 5.58.57.5129151420

The ECB will no longer accept securities in which the issuer bank or a related party is providing support to the transaction through currency swaps or emergency backstop loans, Trichet said.

It will also require bonds to be publicly rated and for the rankings to be explained in published reports. The securities should have new reports from rating firms every three months.

``The losers are the banks retaining bonds to raise cheap collateral, now the cost will be higher,'' said Luca Jellinek, a London-based strategist at Royal Bank of Scotland Group Plc. ``The winners are the rest of the euro system whose collateral has been edged out by retained ABS.''

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Wednesday, September 03, 2008

Mining Consolidation Interactive Map

A little bit off topic but i think this map from the Financial Times is worth a least a brief look.

Ausnahmsweise hat nachfolgendes nur über Umwege mit der Blogthematik zu tun. Die Karte der Financial Times ist aber einfach zu gut um nicht zumindest einen flüchtigen Blick drauf zu werfen.

As the mining sector consolidates, the FT looks at the top 50 mining deals, the most acquisitive companies and the reasons behind the ‘super cycle’ in commodity prices. Our interactive feature uses maps, charts, audio and images to explain what is happening

Mining
Consolidation Interactive Map

>Lets hope they have conservatively financed the takeovers......... Wouldn´t suprise me if at least some of the latest deals have used too optimistic models for commodity pricing in the future.....

> Bleibt zu hoffen das besonders die letzten Übernahmen konservativ und nicht unter Einbeziehung zu optimistischer Preisprognosen finanziert worden sind......
Long-term damage feared as commodities fall FT
Of the 21 commodities tracked by Deutsche Bank, only four – live cattle, lumber, sugar and pork bellies – show positive returns so far in the second half of the year, while the others have posted losses from 5 per cent to almost 40 per cent.......

However, there is little agreement among market participants about whether the recent falls presage commodities dying as a source of strong returns for investors, or that it is all just a small wound that will heal soon.....

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Monday, September 01, 2008

Remnant Of A Bygone Era.......

Nice due dilligence...... If an investors pumps money to "Pirate Equity" under such "favourable" terms they deserve to get ripped off...... The same is true for most of the hedge funds out there ( UPDATE via Naked Capitalsim : Hedge Funds Continuing to Take It on the Chin & Ospraie to Close Flagship Hedge Fund After 38% Loss ) ..... Lets´hope that not too much pension fund money is involved...... The mother of all pump & dumps is probably the Fortess IPO Plundered Fortress / Pump & Dump At Its Best . Enjoy!

Da kann man wohl getrost von ganz genauer Due Dilligence sprechen... Wer Pirate Equity unter solchen Bedingungen Geld in den Rachen wirft hat es verdient so abgezockt zu werden...... Gleiches kann fast ausnahmslos für die Gebührenstrukturen der Hedge Fonds behauptet werden ( Passendes Update viw Naked Capitalism Hedge Funds Continuing to Take It on the Chin &Ospraie to Close Flagship Hedge Fund After 38% Loss ). Bleibt zu hoffen das nicht zu viele Pensionskassen involviert sind.....Die Mutter aller Deals in Sachen Pirate Equity is vermutlich der Börsengang von Fortress gewesen ( siehe Plundered Fortress / Pump & Dump At Its Best ). Glückwunsch den Altaktionären!


You Must Remember This? KKR Hopes Not WSJ
Pitching its initial public offering of stock, KKR portrays itself as a kind of new, enlightened capitalist. Fourteen times throughout its SEC filing, KKR mentions plans to align its interests with potential shareholders. It gleefully contrasts itself to rival Blackstone Group, stressing how its partners won't be cashing out in the ostentatious style of Blackstone's founders . There's even a pledge to serve the environment and other "stakeholders" tied to the KKR ecosystem.

Then there's the KKR that the firm would prefer you forget: That it already has two publicly traded investment vehicles. They've both performed miserably and have needed restructuring. KKR has proposed rescuing one of them, KKR Private Equity Investors, by folding it into its parent. The shareholders of the other, KKR Financial Holdings LLC, known as KFN, are being left to fend for themselves.

KFN was forged in the credit-slinging days of 2004 and 2005, as a vehicle to invest in the mortgage-securities market. It was supposed to show that KKR could do more than just plain leveraged buyouts, an important step for building its resume as a public firm.

KFN didn't do much to buff that resume. Outside investors have put $2.4 billion into KFN since 2004. Its market cap is now just over half that. Admirably, its two founders and other partners personally injected $57 million when the company ran into credit-market trouble a year ago. Yet last April the company had to issue still more shares, priced below their own book value, to forestall credit problems.

Despite switching away from mortgages and into the healthier market for top-rated corporate debt, KFN still trades at $9.38 per share, a deep discount to its book value of $12.71 per share.
Perhaps one reason for that discount is investors' continued worries about KFN's fee structure, which looks like a remnant of a bygone era.

For example, KFN investors pay a 1.75% management fee based on the size of KFN's equity. This takes away an incentive for KKR to buy back stock, even though this seems an obvious path for a company trading at such a discount to book.



..... of the other, KKR Financial Holdings LLC, known as KFN, has no high-water-mark feature, a typical hedge-fund provision which keeps the funds from earning incentive fees until they completely make up any investor losses. Those incentive fees, which can award up to 25% of profits above a 2% quarterly hurdle rate, are paid quarterly, so managers just need to post a good three month's performance to cash in. Most hedge-fund managers need to hold things together for a year to get paid. During 2007, when KFN lost $100 million, its managers made incentive fees of $17.5 million

That's not all, because these executives are paid again for, well, doing their jobs. On top of the management fee, KFN compensates its own executives for legal, accounting, due diligence and other services "that outside professionals or outside consultants would otherwise perform."

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