Archive for the 'Finance' Category

Quite Possibly the Most Elucidating Interview of the Financial Crisis: Cramer on Daily Show

Posted on Friday, March 13th, 2009 at 8:20 pm.

The interview which developed over the past week after Stewart blasted CNBC in a clip from last week that garnered 1.6M hits on the internet alone features a very sober Stewart charging Cramer and more generally CNBC with abdicating its role as “independent business media” during the run up of the past 8 years that led to the spectacular $8Tn housing bubble and 14,000 Dow.

(Vishal’s commentary and the rest of the interview after the jump. -K)

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Posted on Monday, January 19th, 2009 at 4:49 pm.

I mentioned *a while ago that Circuit City declared bankrupcty.

On the 16th they officially announced the closing of all retail operations and the beginning of liquidation.  Good fucking riddance.

Dubai Drowning in Debt: Chickens Come Home to Roost for Dubai's Debt Financed Property Boom

Posted on Tuesday, November 25th, 2008 at 7:03 pm.

I know there was a blog entry about Dubai’s building boom earlier in the year from Kevin:

Now, however, the boom has been exposed as something of a bubble of sorts, which has saddled most of Dubai’s real estate companies with mountains of debt and threatens the emirate’s viability as well as the current structure of the UAE. The housing bubble has burst around the world and especially in the areas which experienced the largest part of the boom such as Dubai, London, California, and Florida. Dubai’s main problem is that it’s economy hasn’t been diversified (as I covered tangentially in a reply to that blog post) and as such they far and away the most exposed to the housing bust since their boom has been entirely debt financed.

For those of you who don’t know about the UAE’s current structure; it is a loose confederation of 7 states. Think of a system closer to the EU or under the original Articles of Confederation of the US as opposed to the current US Constitutional government.

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Citigroup's Enormous Bailout On the Way

Posted on Monday, November 24th, 2008 at 12:07 am.

Citigroup once again threatens to bring down the US financial system (when hasn’t it been doing that for the last 2 years) due to it’s plunging stock price and so the US government is ironing out another bailout of epic proportions.  Essentially the worry is that the crumbling stock price could start to scare off corporate trading partners as well as average customers, which could lead to a bank run the likes of which we’ve never seen.

The first bailout came two months ago when Wells Fargo, Bank of America, and JP Morgan Chase had to accept $25 billion each at a 5% dividend rate because Citigroup needed $25 billion, and the government did not want Citigroup to be exposed as the weakest bank.  Of course just looking at Citigroup’s losses over the past year and the coming year made it obvious that Citigroup was in a far weaker position than the other three which have had some writedowns but remained profitable and will likely remain somewhat profitable into the future.

Well after the events of the last two weeks, all bets are off.  The market has basically put a massive bullseye on one of the largest banks in the world, and now the US government is structuring another bailout for Citigroup, which has $2 trillion assets ($800 billion deposits) all around the world as well as hundreds of billions in assets off of their books (which are causing all of these jitters).

Citigroup is different in some sense from banks like Lehman, Wamu, or Wachovia because Citigroup is in the class of banks so big and diverse that it is the financial system, not just a small isolatable fraction, providing services of every kind such as investment banking, corporate banking, commercial lending, and commercial banking in every corner of the globe to 200+ million customers including virtually every major corporation.  Citigroup is exhibit A in definition of “too big to fail”.

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Pretty Epic Resignation of a Hedge Fund Manager

Posted on Friday, October 17th, 2008 at 8:19 pm.

He presumably wants to go out on top or where he is right now; in any case a fairly interesting read.  I suppose it comes off as a semi-rant, but it is interesting nonetheless.  Speaks volumes about the cynicism these guys have, since he’s fairly typical of hedge fund managers.

Bailout Package FAILS: Biggest Market Decline (By Points) in History: $1.2 Trillion Wiped Out

Posted on Monday, September 29th, 2008 at 4:25 pm.

  • Update: Hilarious news Campbell Soup Co. was the only stock in the S&P 500 that escaped yesterday’s historic sell-off. That’s right: 499 fell, and just one rose. Wall Street was clearly preparing for the soup lines.

Dow is down 780 to 10370 which is around 7%; Nasdaq is down 200 to 1980 (below 2000 for the first time in a while iirc) around 9%; S&P down 100 to 1100 around 9%. This isn’t just about the banking industry; every single one of the Dow’s 30 companies fell today. Sure it’s all speculative value, but $1.2 trillion wiped out is a pretty big deal.

Pretty dramatic stuff; bigger across the board declines than the opening day after 9/11.

The house vote failed somewhat across party lines, Dems were 141-94 (ish) while the Republicans were 66-132 (ish).

No idea what happens now, it’ll be interesting to see where the market goes; regional banks got slammed by the news, and we can probably expect more failures in the weeks to come. Most of the big banks will have to keep all the bad assets on their books if they don’t get the bailout.

Citigroup acquired Wachovia’s banking assets (as mentioned earlier).

Era of Independent Investment Banks Officially Over: This May Actually Impact Your Bank Deposits

Posted on Sunday, September 21st, 2008 at 11:21 pm.

Goldman Sachs and Morgan Stanley, the two remaining of the five independent investment banks, have officially changed status from Investment Banking companies into Bank Holding Companies (commercial/universal bank model).

What this means is that they will now be able to start commercial banks and compete directly in all markets with their three universal bank competitors, Bank of America, JP Morgan Chase, and Citigroup as well as other more “pure” commercial banks such as Wells Fargo or Wachovia. They will also get access to the fed discount window (for borrowing overnight) as well as have required reserve limits.

The main reason they had to pursue this path is that investment banking as we know it, where you leverage your capital 25-30 times over and run with it, is over. Now, with their three largest competitors having huge commercial banks, Goldman Sachs and Morgan Stanley have no choice but to go with the depositary model to buttress their balance sheets.

What this means for you is that there will be massive consolidation in the US banking sector. Essentially, Goldman Sachs and Morgan Stanley are going to want to acquire scale to compete directly on the same terms as Bank of America (acquired Merrill Lynch), JP Morgan Chase, and Citigroup. This means that they will need to buy lots of smaller banks probably rather fast.

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