Barbers are the winners in this mkt environment. Long lines of Corp's comin' in for their buzz cuts.
If the shareholders don't kick those guys out of their catbird seats, and get responsible management and an attentive board of directions, they're fools..
And guess what, I think they're fools; and my investment posture stares at them and waits for the DJIA to speed up its slow motion swan dive.
"SACRAMENTO Largely as a result of the steep decline in California's housing market, the state budget that had a projected $4 billion surplus when it was adopted in August will end the year nearly $2 billion in the red, the Legislature's chief fiscal analyst said Wednesday."
On December 20, 2007, the User Agreement for Inter Institution Transfers will change. Here what's changing:
After a review of our security practices, the daily limit on Outgoing Standard (3-day) transfers was changed temporarily to $2,000 on October 30, 2007. That $2,000 limit will be made permanent with this upcoming change to the User Agreement.
To review the entire User Agreement that will go into effect on December 20, you can see it at: Citibank.com - IIT Terms and Conditions If you use the Inter Institution Transfer service after December 20, you'll have to agree to this new version.
I brought this up on Tuesday, in the comments to Tanta's Countrywide AVM posting, but got no response, so I'd like to ask it again
Forgive the OT, but wondering if anybody has any idea of the volume, relevant indices (ala ABX), etc. for this new acronymic entry - the ARS. "Auction Rate Securities are floating rate securities that are marketed by financial institutions with auction reset dates at 7, 28, or 35 day intervals to provide short-term liquidity. " They sound like an Option Arm for CP.
With State budgets going red it's becoming more a matter of which states can keep their budgets + as a key factor of where to live
Current deadbeat states (those getting >110%+ of their tax money back w.r.t "Tax Fairness Act of 2005."
Alabama
Alaska
Arizona
Arkansas
Idaho
Kansas
Kentucky
Louisiana
Mississippi
Missouri
Montana
North Dakota
Oklahoma
South Carolina
South Dakota
Tennessee
Utah
Virginia
West Virginia
Wyoming
"For several months, certain of these auctions have not had sufficient bidders to allow investors to complete a sale, indicating that immediate liquidity at par is unavailable."
Could the inability to sell a security send a company into BK, or just force it to go get an expensive short-term loan elsewhere?
That, plus "Due to Federal regulation, you can only make 6 transfers into or out of your savings or money market account during any statement period."
I dunno about the $2000 restriction but this one ought to have always been there. Its to do with the the type of accounts for which a certain percent has to be deposited as reserves with the Fed - for demand ( kinda I want it NOW, no gun to head needed ) accounts they need to deposit 10% ( I think ) with the Fed. For other accounts, since 199x, 0% reserves need to be deposited.
Reserves restricts the leveraged amount available to lend out as per the fractional system of banking. 0% reserves basically unrestricts them ( but subject to Basel II requirements ), so banks like to have money that is subject to 0% reserve requirements. By restricting the withdrawals to 6/month, those accounts qualify for that. Wikipedia and the Fed has lots of readable stuff on this. And then you'll get interested in M0, M1, M2, M3, MZM etc money supply I bet.
I noticed this for the first time at my cu this week. Transferred money out of TD Ameritrade and saw the disclosure. Can somebody explain? What's up with Citi "limiting" incoming to $100k and outgoing to $2k? Hmmmmmm.
A couple of thoughts - has anyone heard of research being done on the "for sale" holdings of cash-rich non-financial companies? I remember the late 1990s when banks and other bond managers were lining up to pitch "active cash management" to tech companies sitting on piles of cash - I wouldn't be surprised if the bankers got in on the game given all the cash that's been piling up on corporate balance sheets.
An addition anecdotal data point on odd bank behavior - I'm a long-standing small business accountholder with JP Morgan, who suddenly put a seven day "hold" on a deposit from another account we have with another bank here in New York, and it's taken a lot of back and forth to get the money released earlier. I've never seen them do this before.
Customers can always transfer money to their citi checking account and then write a check. Unless the $2000 restriction applies to checking account transfers as well....
I'm a long-standing small business accountholder with JP Morgan, who suddenly put a seven day "hold" on a deposit from another account we have with another bank here in New York, and it's taken a lot of back and forth to get the money released earlier. I've never seen them do this before.
Really trying to goose the float, ain't they?
Then again, everytime I travel overseas I have to call somebody to use my ATM card. I'm thisclose to upping sticks.
Perhaps a little OT but maybe of interest to some:
From der Globe und Mail up here in Canada.
"Frozen debt finds no buyers
TARA PERKINS AND ANDREW WILLIS
00:00 EST Thursday, November 15, 2007
The first attempt to trade troubled commercial paper since a crisis erupted in mid-August flopped yesterday, leaving corporations and banks across the country to continue floundering as they try to value their holdings.
The much-hyped trading platform run by electronic exchange Perimeter Financial Corp. failed on its first day to match any buyers with sellers of third-party asset-backed commercial paper, although its creators remain confident that the two sides will eventually come together on price."
Several contacts of mine tell me that the money center banks pitched this ... to money funds and corporations over the past 2 years as a little spice on the stew but still AAA. They bought it like candy.
What? You mean the stew that came with my free lunch has melamine filler in it?
I don't get this at all. If your company manufactures widgets and that's your expertise and competitive edge, then MAKE YOUR MONEY MAKING WIDGETS! You wouldn't speculate drilling for oil would you? Don't speculate with your cash position either, you have no competitive edge, none, nada. All this is is speculating. [sigh]
I realize this is a very elementary question, but what exactly is par value? Obviously it's not the "real" i.e., not the market value.
Par is the value written on the actual certificate (at least in bonds and stocks). So if a bond has a par value of $1000 (usually), that's what the company has to pay to redeem it. But if interest rates have gone up since issuance, it is probably worth less than the par value (market value).
Soo.. not only can AAA become transmuted to junk, but Tier I assets can jump to Tier II in a single bound.
So Citi is whispering liquidity problems by reminding their customers that savings and money-market are NOT demand accounts. Because when there isn't a reserves crunch, everyone treats them as if they were identical.
You wouldn't speculate drilling for oil would you? Don't speculate with your cash position either, you have no competitive edge, none, nada. All this is is speculating.
Totally agree. And how much extra do you get out of it anyway ? I did a calculation once on what .25% extra on 100K got you. Looked like a decent meal with reasonable wine for two at the GreenBrier in Boulder.. Is it really worth it I ask myself - just do without that fine meal and go for a walk or something.
I reckon this is nickel and diming - correct me if I wrong, somebody - reminds me of some a*hole chain that decided to ding their waitstaff for the creditcharge that it cost them for tips left as addons on the credit card. My recollection is that for this 300 restaurant chain they made 3 million a year. jeez.. talk about bean counters.
This is yet another item that may not be huge in and of itself, but adds the ever-growing pile of unknown risks...
This may not end in a panic, but if you wanted to engineer a panic, planting all these "seeds" on balance sheets everywhere would probably provide a good foundation.
With Citi, it's hard to interpret if that new restriction is a sign of trouble, or just another manifestation of their bait-and-switch, stick-it-to your-customer-mindset.
When they first set up an online money market fund, way back in late 1990s, they offered a slightly higher than average rate and we opened an account. Within 90 days, the rate was cut by two-thirds.
I'm a long-standing small business accountholder with JP Morgan, who suddenly put a seven day "hold" on a deposit from another account we have with another bank here in New York, and it's taken a lot of back and forth to get the money released earlier. I've never seen them do this before.
Really trying to goose the float, ain't they?
Then again, everytime I travel overseas I have to call somebody to use my ATM card. I'm thisclose to upping sticks.
Wondering if anyone else was up @ ~ 7am CT this morning and watching CNBC. Special guest was Jack Bogle. I thought that all of the level-headed, good old-fashioned commonsense he was imparting was going to explode some talking heads. It was a breath of fresh air to be sure.
jim a: Normally withdrawals from a savings account are limited in number per month but not in amount, right? And withdrawals from a MM fund should not limited as to amount, but perhaps, depending upon agreement only to how many during a month. If a bank began to limit the AMOUNT I could withdraw from a savings or MM account I might be worried.
Chophouse, re: your Auction Rate Securities (ARS) question...i started out typing a response on the thread the other day when you first posted it but never ended up finishing it cos I'm still trying to remember how they work...
There are no indices on ARS, probably because they are more like CP so tougher to create a debt index, which is usually longer, like 5 years.
I vaguely remember being involved in one where I think the gist was that it was a perpetual subordinated obligation issued by a financial institution, and hence counted towards its capital, and was sold on a rolling basis to certain counterparties (say a corporate in this case). They really are garbage securities, and I'm amazed anyone is dumb enough to buy the structure at Par.
Say a bank issues a perpetual ARS bond with a MAXIMUM coupon of L+150 (Libor+150), and is offered in an auction at issue. Say various investors are willing to buy it at L+140 until the auction next month. Then next month some investors maybe buy it at L+130, then the next month it may take L+145 to clear it. So what do we have...the issuer is paying out a bit less than the maximum 150bps, thanks to demand for the bond from various investors. And different investors can buy/sell the bond each month.
However, if the auction "fails", such that nobody wants to buy the bond at L+150, then the original holder, the corporate in this case, is left with it earning L+150. And lets say the auction continues to fail (say because it was issued by eg. Downey Financial who probably would trade at 2500 over nowadays for such a security (total guess, could well be higher)). Then, the value of that bond would be a perpetual L+150 bond discounted at 2500 over, so lets say 40 cents on the dollar.
So your corporate, trying to squeeze out a few extra bps of return, just lost 60% of its capital. And the even crazier thing is that they didn't even have upside when they bought it, as the bonds can be taken away from them at Par every month.
Insanity. And trust me, the investment banks make a killing on this garbage.
If anything i wrote here is wrong, feel free to correct, I'm no expert on ARS...
Isn't this the same thing that has been happening to the Canadian miners (e.g. NXG)?
Barbers are the winners in this mkt environment. Long lines of Corp's comin' in for their buzz cuts.
If the shareholders don't kick those guys out of their catbird seats, and get responsible management and an attentive board of directions, they're fools..
And guess what, I think they're fools; and my investment posture stares at them and waits for the DJIA to speed up its slow motion swan dive.
Soon the beauty salons will be doing booming business too, as the Corp's come in for their full waxing.
No need to even watch. Assume the position and wait for the gift baskets full of their frightened investors' money to arrive.
I wonder how many 'enhanced' money market funds might have bought in on these things.
I bet there are a few companies who won't be happy to see what used to be liquid assets freeze up into icebergs that could sink their ship.
Figure the previous sentence is worth at least ten points in metaphore Scrabble.
MIT index shows first drop in commercial property value since '03
Indicates housing woes, credit crunch 'may be spreading'
MIT index shows first drop in commercial property value since '03
Bank of NY getting out of Ryland while the getting is good?
Expired
'08 CA state budget in the hole:
'08 state budget may face shortfall» Ventura County Star
"SACRAMENTO Largely as a result of the steep decline in California's housing market, the state budget that had a projected $4 billion surplus when it was adopted in August will end the year nearly $2 billion in the red, the Legislature's chief fiscal analyst said Wednesday."
From lurker's post -
The value of U.S. commercial real estate owned by big pension funds fell 2.5 percent in the third quarter of 2007...
more pension pain?
Anyone see this or hear of it?
Dear Customer:
On December 20, 2007, the User Agreement for Inter Institution Transfers will change. Here what's changing:
After a review of our security practices, the daily limit on Outgoing Standard (3-day) transfers was changed temporarily to $2,000 on October 30, 2007. That $2,000 limit will be made permanent with this upcoming change to the User Agreement.
To review the entire User Agreement that will go into effect on December 20, you can see it at:
Citibank.com - IIT Terms and Conditions If you use the Inter Institution Transfer service after December 20, you'll have to agree to this new version.
Thank you for your attention.
Sincerely,
Citibank Customer Service
I brought this up on Tuesday, in the comments to Tanta's Countrywide AVM posting, but got no response, so I'd like to ask it again
Forgive the OT, but wondering if anybody has any idea of the volume, relevant indices (ala ABX), etc. for this new acronymic entry - the ARS. "Auction Rate Securities are floating rate securities that are marketed by financial institutions with auction reset dates at 7, 28, or 35 day intervals to provide short-term liquidity. " They sound like an Option Arm for CP.
Link is at http://www.minyanville.com/artic...dex.php? a=14835
chophouse | 11.13.07 - 10:22 am | #
With State budgets going red it's becoming more a matter of which states can keep their budgets + as a key factor of where to live
Current deadbeat states (those getting >110%+ of their tax money back w.r.t "Tax Fairness Act of 2005."
Alabama
Alaska
Arizona
Arkansas
Idaho
Kansas
Kentucky
Louisiana
Mississippi
Missouri
Montana
North Dakota
Oklahoma
South Carolina
South Dakota
Tennessee
Utah
Virginia
West Virginia
Wyoming
steve:
yeah, I see that $2000 daily limit on my citi account now.
That, plus "Due to Federal regulation, you can only make 6 transfers into or out of your savings or money market account during any statement period."
is, shall we say, cute.
Good thing I only have $11.64 in this account
S&P earnings down YOY
operating earnings for the S&P 500 overall fell 8.5%, marking the first year-over-year decline since the fourth quarter of 2001...
consumer discretionary (-39)%
financials -33%
Financials' third-quarter earnings fell 33%: S&P - MarketWatch
"For several months, certain of these auctions have not had sufficient bidders to allow investors to complete a sale, indicating that immediate liquidity at par is unavailable."
Could the inability to sell a security send a company into BK, or just force it to go get an expensive short-term loan elsewhere?
REBear - But if you take out all the sectors that have had earnings fall, earnings are actually up!
It must be true, I heard it on Kudlow...
====================================
That, plus "Due to Federal regulation, you can only make 6 transfers into or out of your savings or money market account during any statement period."
I dunno about the $2000 restriction but this one ought to have always been there. Its to do with the the type of accounts for which a certain percent has to be deposited as reserves with the Fed - for demand ( kinda I want it NOW, no gun to head needed ) accounts they need to deposit 10% ( I think ) with the Fed. For other accounts, since 199x, 0% reserves need to be deposited.
Reserves restricts the leveraged amount available to lend out as per the fractional system of banking. 0% reserves basically unrestricts them ( but subject to Basel II requirements ), so banks like to have money that is subject to 0% reserve requirements. By restricting the withdrawals to 6/month, those accounts qualify for that. Wikipedia and the Fed has lots of readable stuff on this. And then you'll get interested in M0, M1, M2, M3, MZM etc money supply I bet.
-K
re: transfer limits
I noticed this for the first time at my cu this week. Transferred money out of TD Ameritrade and saw the disclosure. Can somebody explain? What's up with Citi "limiting" incoming to $100k and outgoing to $2k? Hmmmmmm.
A couple of thoughts - has anyone heard of research being done on the "for sale" holdings of cash-rich non-financial companies? I remember the late 1990s when banks and other bond managers were lining up to pitch "active cash management" to tech companies sitting on piles of cash - I wouldn't be surprised if the bankers got in on the game given all the cash that's been piling up on corporate balance sheets.
An addition anecdotal data point on odd bank behavior - I'm a long-standing small business accountholder with JP Morgan, who suddenly put a seven day "hold" on a deposit from another account we have with another bank here in New York, and it's taken a lot of back and forth to get the money released earlier. I've never seen them do this before.
From CR: Please post under a different name.
Edited By Siteowner
Fake "Sebastian" again. I'm only obnoxious, not profane, and don't need to resort to all-caps to get my points across.
Sebastia
Customers can always transfer money to their citi checking account and then write a check. Unless the $2000 restriction applies to checking account transfers as well....
MLM,
yeap, we also have a bottom.
sorry, that was the fake seb...
i could'nt resist
and your point is?
Is your money-market fund safe?
I realize this is a very elementary question, but what exactly is par value? Obviously it's not the "real" i.e., not the market value.
I'm a long-standing small business accountholder with JP Morgan, who suddenly put a seven day "hold" on a deposit from another account we have with another bank here in New York, and it's taken a lot of back and forth to get the money released earlier. I've never seen them do this before.
Really trying to goose the float, ain't they?
Then again, everytime I travel overseas I have to call somebody to use my ATM card. I'm thisclose to upping sticks.
Perhaps a little OT but maybe of interest to some:
From der Globe und Mail up here in Canada.
"Frozen debt finds no buyers
TARA PERKINS AND ANDREW WILLIS
00:00 EST Thursday, November 15, 2007
The first attempt to trade troubled commercial paper since a crisis erupted in mid-August flopped yesterday, leaving corporations and banks across the country to continue floundering as they try to value their holdings.
The much-hyped trading platform run by electronic exchange Perimeter Financial Corp. failed on its first day to match any buyers with sellers of third-party asset-backed commercial paper, although its creators remain confident that the two sides will eventually come together on price."
globeandmail.com
Investors Should Spank Banks for Betraying Trust: Mark Gilbert
Investors Should Spank Banks for Betraying Trust: Mark Gilbert - Bloomberg.com
Several contacts of mine tell me that the money center banks pitched this ... to money funds and corporations over the past 2 years as a little spice on the stew but still AAA. They bought it like candy.
What? You mean the stew that came with my free lunch has melamine filler in it?
I don't get this at all. If your company manufactures widgets and that's your expertise and competitive edge, then MAKE YOUR MONEY MAKING WIDGETS! You wouldn't speculate drilling for oil would you? Don't speculate with your cash position either, you have no competitive edge, none, nada. All this is is speculating. [sigh]
MarketWatch
Toxic export - How America's risky subprime mortgages fouled the world's markets
Toxic export: How U.S. subprime crisis contaminated world markets Special Report - MarketWatch
OT: Sebastian, I deleted that post and will ban the poster next time (I've given enough warning!)
Best Wishes.
CR - Thanks for your quick response to Sebastian. We have all had enough.
Banker:
you're so "old" economy thinking!
what you don't understand is how many people fancy themselves smarter than the rest of the pack.
so many of the people out there only know that the markets only go up... (including me).
it's hard to sit by and watch as everybody else makes a fortune.
add in the egos and the misinformation, and you get speculation and unusally low risk premiums.
CR: Thank-you. You're a good man, I don't care what I say about you.
S.
Investors Should Spank Banks for Betraying Trust
But I thought the experts said you should just rub a dog's nose in it?
I realize this is a very elementary question, but what exactly is par value? Obviously it's not the "real" i.e., not the market value.
Par is the value written on the actual certificate (at least in bonds and stocks). So if a bond has a par value of $1000 (usually), that's what the company has to pay to redeem it. But if interest rates have gone up since issuance, it is probably worth less than the par value (market value).
Soo.. not only can AAA become transmuted to junk, but Tier I assets can jump to Tier II in a single bound.
So Citi is whispering liquidity problems by reminding their customers that savings and money-market are NOT demand accounts. Because when there isn't a reserves crunch, everyone treats them as if they were identical.
=====================================
You wouldn't speculate drilling for oil would you? Don't speculate with your cash position either, you have no competitive edge, none, nada. All this is is speculating.
Totally agree. And how much extra do you get out of it anyway ? I did a calculation once on what .25% extra on 100K got you. Looked like a decent meal with reasonable wine for two at the GreenBrier in Boulder.. Is it really worth it I ask myself - just do without that fine meal and go for a walk or something.
I reckon this is nickel and diming - correct me if I wrong, somebody - reminds me of some a*hole chain that decided to ding their waitstaff for the creditcharge that it cost them for tips left as addons on the credit card. My recollection is that for this 300 restaurant chain they made 3 million a year. jeez.. talk about bean counters.
-K
Yearning and SK,
Yup, the risk/reward is all wrong.
Course I say that about lots of the market plays I read about here too
This is yet another item that may not be huge in and of itself, but adds the ever-growing pile of unknown risks...
This may not end in a panic, but if you wanted to engineer a panic, planting all these "seeds" on balance sheets everywhere would probably provide a good foundation.
With Citi, it's hard to interpret if that new restriction is a sign of trouble, or just another manifestation of their bait-and-switch, stick-it-to your-customer-mindset.
When they first set up an online money market fund, way back in late 1990s, they offered a slightly higher than average rate and we opened an account. Within 90 days, the rate was cut by two-thirds.
CR: Thank-you. You're a good man, I don't care what I say about you.
S.
Sebastian | 11.15.07 - 2:13 pm |
If Sebastian weren't real, CR would have to invent him!
I'm a long-standing small business accountholder with JP Morgan, who suddenly put a seven day "hold" on a deposit from another account we have with another bank here in New York, and it's taken a lot of back and forth to get the money released earlier. I've never seen them do this before.
Really trying to goose the float, ain't they?
Then again, everytime I travel overseas I have to call somebody to use my ATM card. I'm thisclose to upping sticks.
OT:
Wondering if anyone else was up @ ~ 7am CT this morning and watching CNBC. Special guest was Jack Bogle. I thought that all of the level-headed, good old-fashioned commonsense he was imparting was going to explode some talking heads. It was a breath of fresh air to be sure.
jim a: Normally withdrawals from a savings account are limited in number per month but not in amount, right? And withdrawals from a MM fund should not limited as to amount, but perhaps, depending upon agreement only to how many during a month. If a bank began to limit the AMOUNT I could withdraw from a savings or MM account I might be worried.
Chophouse, re: your Auction Rate Securities (ARS) question...i started out typing a response on the thread the other day when you first posted it but never ended up finishing it cos I'm still trying to remember how they work...
There are no indices on ARS, probably because they are more like CP so tougher to create a debt index, which is usually longer, like 5 years.
I vaguely remember being involved in one where I think the gist was that it was a perpetual subordinated obligation issued by a financial institution, and hence counted towards its capital, and was sold on a rolling basis to certain counterparties (say a corporate in this case). They really are garbage securities, and I'm amazed anyone is dumb enough to buy the structure at Par.
Say a bank issues a perpetual ARS bond with a MAXIMUM coupon of L+150 (Libor+150), and is offered in an auction at issue. Say various investors are willing to buy it at L+140 until the auction next month. Then next month some investors maybe buy it at L+130, then the next month it may take L+145 to clear it. So what do we have...the issuer is paying out a bit less than the maximum 150bps, thanks to demand for the bond from various investors. And different investors can buy/sell the bond each month.
However, if the auction "fails", such that nobody wants to buy the bond at L+150, then the original holder, the corporate in this case, is left with it earning L+150. And lets say the auction continues to fail (say because it was issued by eg. Downey Financial who probably would trade at 2500 over nowadays for such a security (total guess, could well be higher)). Then, the value of that bond would be a perpetual L+150 bond discounted at 2500 over, so lets say 40 cents on the dollar.
So your corporate, trying to squeeze out a few extra bps of return, just lost 60% of its capital. And the even crazier thing is that they didn't even have upside when they bought it, as the bonds can be taken away from them at Par every month.
Insanity. And trust me, the investment banks make a killing on this garbage.
If anything i wrote here is wrong, feel free to correct, I'm no expert on ARS...