Vikram, at least for now. Both Northern Trust and Goldman have said they think this lull is the "eye of the hurricane" - and there is more to come
Look at the Bloomberg graph. This is the third time it seemed like the credit crisis was easing, and the previous two times were just brief lulls - so we have to wait and see.
I think Buffett is correct, the risks of a financial meltdown have diminished, but there are many serious problems ahead, especially for housing.
Interesting Times, yeah, that 3rd wave kept on going! It seems the Fed pulled out all the stops this time - I wonder what they will do if there is a 4th wave?
Vikram, It might be a sign that treasuries are being viewed as risky too, given all the crap on the Fed's books and the expectation that there will be plenty more bailouts, so less of a spread.
the way i see it is this means nothing given that Libor was flat to up across the spectrum indicating continued stress in interbank lending. the fact that 3mo UST's yield were up 5.8% when stocks were down is ominous as the yields would normally be DOWN. i think the money flowed into commodities today.
I have given that subject a lot of thought. Really, the question is, "where does the Fed want the money to go?"
I think money goes into equities, gradually, as bonds sink. Companies with strong balance sheets, little debt and good cash flow. I don't even think dividends will matter much as the dividend tax rate goes up along with LTCG taxes.
I am looking at moving more money into NatGas trusts. They pay royalties that get great tax treatment...
The TED spread sounds like some kind of creepy Kennedy sexual perversion. Perhaps you can omit the word "spread" and use a less visually disturbing term.
As for the other TED spread, this has to be just a pause from what I'm hearing.
lama | 05.05.08 - 6:29 pm | #
To keep on the Kennedy theme... its the pause that refreshes... anyone who's done a pub crawl knows how important that is. And I too doubt we're any where close to 'last call'... though as with 'the top' they won't ring a bell.
Well, frankly, the Fed has indicated that it will do whatever is necessary to avert crisis, so there you go. and in hand in velvet glove with Euro central banks too, i might add. so nothing left to see here. if warren buffett says the worst is over, well, i guess it is. i wouldn't want to be on the other side of where his money is going.
but that doesn't mean it's party time. what it means is that things will be dealt with to preserve order in the financial markets, it does not mean that massive losses will not be suffered.
and speaking of massive losses, and having a vegas post up today, i think we should take a little action on what happens to countrywide! will the deal with BOA go though and if so, at how much? Will they have to go BK? Who will get the spoils if they do? I say the odds of BK are now 7 in 10. what say ye?
I am wondering whether the CDS on CFC's debt might be even more of a catalyst for collapse than the mortgages and servicing, in the event of BK. There is no way Ben lets this nuclear chain reaction go poof.
BAC should walk. I doubt there would be any suitor that comes in without a lot of deal sweetening. PPT & OTS will be the brokers of a CFC deal. Taxpayers will get the shaft. Shareholders might get zero.
There is no way Ben lets this nuclear chain reaction go poof.
Again, barely, what possible interest could the Fed have in this? What CDOs? Also, past 90 delinqucies were 4.6% of the total loans as of March at CFC. Does that sound catastrophic to you? It's in line with what everyone else is seeing. Most of their originations were sold off.
Or is the answer to every blog entry on here "BEN BEN BEN BEN" with no analysis?
I'm not sure that this is all that significant. The American consumer is tapped out, and the credit bubble has popped. Now all that debt has to either be written-off or slowly extinguished. Either way, it'll take years for American consumers to return to solvency, and until then the US is going to be very slow. Add to this the insolvency of the Fed Govt (just ask David Walker), and the inevitable and relentless increase in energy prices as supply continues to be unable to meet demand and we have some very rough times ahead.
ipodius - It's not their loans (which are shit and cratering), it's their debt, & the CDS. If they fail the bondholders could get the shaft since I am pretty sure the FHLB is made whole. The CDS explosion is what Ben can't allow.
"barely writes:
ipodius - It's not their loans (which are shit and cratering), it's their debt, & the CDS. If they fail the bondholders could get the shaft since I am pretty sure the FHLB is made whole. The CDS explosion is what Ben can't allow."
CFC is a large institution, and there is no doubt that the authorities will want it taken out cleanly, with the debt holders made whole.
But they're not going to get hysterical about the CDS payoff. BSC was a different case - they are a broker and CDS counterparty, and the risk is that the inter-dealer market would collapse. CFC is just a reference entity; the CDS market has dealt with bankruptcies before (despite the hyper-ventilations from some on the internets). Since CFC would dismembered between the bank and non-bank portions, it may be that there are buyers for both parts, making the debt holders largely whole (limiting the CDS payout).
Getting back on topic, the TED spread will keep narrowing. Unless of course, things get worse. But even if things don't deteriorate markedly, the credit markets typically shut down in the summer. Spreads will probably whip around on no volume; not really offering much information.
Any new info on the rumors that false numbers were being fed into the LIBOR? The version I read was that the LIBOR was being held artificially low. Since this made many lending rates cheaper than they "should have been," I never got a clear idea what the motive for the alleged manipulation was.
"Billy Hill writes:
Any new info on the rumors that false numbers were being fed into the LIBOR? The version I read was that the LIBOR was being held artificially low. Since this made many lending rates cheaper than they "should have been," I never got a clear idea what the motive for the alleged manipulation was."
Motivation: LIBOR rates posted by banks are public, and they are the rate that the bank says that it could borrow at. If a bank posted a real ugly rate (i.e., it's having to pay a big spread in the interbank market), a bank run could easily be started...
Motivation: LIBOR rates posted by banks are public, and they are the rate that the bank says that it could borrow at. If a bank posted a real ugly rate (i.e., it's having to pay a big spread in the interbank market), a bank run could easily be started...
Thanks, Bond Guy. I think this is the key issue. The LIBOR is an average which is made public. However, are the individual numbers that go into LIBOR public? It is those individual numbers that it is claimed are misreprented. It also seems to me that a single LIBOR liar acting on its own would not have much effect on the average, especially since the LIBOR calculators throw out highest and lowest before doing calculation.
I am looking for some help here ... I am operating under the assumption that erosion of the dollar and continued printing of money will be the dominant factors in the foreseeable future.
So with that in mind, I am hedging with swiss francs - or specifically, the FXF ETF. It's done very well for me since end of q3 last year. My thoughts were that it got me out of the dollar, it positions me to benefit if whatever is left of the swiss carry trade unwinds, and keeps me from holding a (possibly) overbought Euro.
So, any comments on swiss francs as a dollar inflation hedge now and going forward - especially if there is greater turmoil and possibly more extreme dollar drops in the future ?
Is there some particular risk that the swiss franc exposes me to that I am perhaps not aware of ?
Bear Bailout/29Bill taxpayer backstop
TSLF, PDCF, TAF
ABS, MBS, impaired asset lending
non-bank lending
non-US bank lending
timing & market manipulations
unceasing rate cuts
banks hoarding/not lending
severe consumer retrenchment
CDS market still very unstable due to counterparty risk
BK, defaults, insolvencies on rise AKA confessional
Credit crisis may have abated, I do NOT think it has yet reached its low point, the real deep bloodletting can and must occur...and will sooner than later. Even severe reflating, hyperinflation cannot stop it. Still a zero sum game
CR, can this be interpreted as the credit crises is abating ?
Regards
I'm calling the next wave in August.
It will most likely go lower than 1% for most of the summer.
But boy did wave 3 linger longer than expected.
Vikram, at least for now. Both Northern Trust and Goldman have said they think this lull is the "eye of the hurricane" - and there is more to come
Look at the Bloomberg graph. This is the third time it seemed like the credit crisis was easing, and the previous two times were just brief lulls - so we have to wait and see.
I think Buffett is correct, the risks of a financial meltdown have diminished, but there are many serious problems ahead, especially for housing.
Best Wishes.
Interesting Times, yeah, that 3rd wave kept on going! It seems the Fed pulled out all the stops this time - I wonder what they will do if there is a 4th wave?
Best Wishes.
Let's skip the 4th wave. Surely real estate will start holding its ground.
Vikram, It might be a sign that treasuries are being viewed as risky too, given all the crap on the Fed's books and the expectation that there will be plenty more bailouts, so less of a spread.
Barely, 3 month treasuries being viewed as risky? The end of the world cannot be SO close.
I agree with barely, ultimately this spread will tighten because the riskiness (and increased issuance) of Treasuries will push it that way.
barely,
That is alternative interpretation that I have been considering - but where does the money go then?
IIRC, corporate paper has been on a roll per earlier post on another thread. Interesting to see oil pop to a new record as well.
the way i see it is this means nothing given that Libor was flat to up across the spectrum indicating continued stress in interbank lending. the fact that 3mo UST's yield were up 5.8% when stocks were down is ominous as the yields would normally be DOWN. i think the money flowed into commodities today.
"but where does the money go then"
I have given that subject a lot of thought. Really, the question is, "where does the Fed want the money to go?"
I think money goes into equities, gradually, as bonds sink. Companies with strong balance sheets, little debt and good cash flow. I don't even think dividends will matter much as the dividend tax rate goes up along with LTCG taxes.
I am looking at moving more money into NatGas trusts. They pay royalties that get great tax treatment...
The TED spread sounds like some kind of creepy Kennedy sexual perversion. Perhaps you can omit the word "spread" and use a less visually disturbing term.
Elvis:
The TED spread sounds like some kind of creepy Kennedy sexual perversion.
Elvis has a very twisted mind. I like that in a person.
Elvis,
Good one!
I was going to try to out-do you, but I self censored.
As for the other TED spread, this has to be just a pause from what I'm hearing.
As for the other TED spread, this has to be just a pause from what I'm hearing.
lama | 05.05.08 - 6:29 pm | #
To keep on the Kennedy theme... its the pause that refreshes... anyone who's done a pub crawl knows how important that is. And I too doubt we're any where close to 'last call'... though as with 'the top' they won't ring a bell.
Isn't TED spread falling because the yield of 3mo T-Bill is rising? If so, can we call it an improvement?
Chief Debt Officer < Gold Star
Have to agree with barely. The 3-month treasuries yield has been rising strongly. The LIBOR has barely moved.
Well, frankly, the Fed has indicated that it will do whatever is necessary to avert crisis, so there you go. and in hand in velvet glove with Euro central banks too, i might add. so nothing left to see here. if warren buffett says the worst is over, well, i guess it is. i wouldn't want to be on the other side of where his money is going.
but that doesn't mean it's party time. what it means is that things will be dealt with to preserve order in the financial markets, it does not mean that massive losses will not be suffered.
and speaking of massive losses, and having a vegas post up today, i think we should take a little action on what happens to countrywide! will the deal with BOA go though and if so, at how much? Will they have to go BK? Who will get the spoils if they do? I say the odds of BK are now 7 in 10. what say ye?
Is it possible that Warren Buffet is incorrect and the chance of financial crisis has increased? Oh, I forgot. Warren Buffet is a God.
I am wondering whether the CDS on CFC's debt might be even more of a catalyst for collapse than the mortgages and servicing, in the event of BK. There is no way Ben lets this nuclear chain reaction go poof.
BAC should walk. I doubt there would be any suitor that comes in without a lot of deal sweetening. PPT & OTS will be the brokers of a CFC deal. Taxpayers will get the shaft. Shareholders might get zero.
There is no way Ben lets this nuclear chain reaction go poof.
Again, barely, what possible interest could the Fed have in this? What CDOs? Also, past 90 delinqucies were 4.6% of the total loans as of March at CFC. Does that sound catastrophic to you? It's in line with what everyone else is seeing. Most of their originations were sold off.
Or is the answer to every blog entry on here "BEN BEN BEN BEN" with no analysis?
ok, but how much of the spread narrowing is merely due to the yield on the T-bills rising.
"Chief Debt Officer writes:
Isn't TED spread falling because the yield of 3mo T-Bill is rising? If so, can we call it an improvement?"
Whoops, missed this earlier post. Exactly. Not really an improvement at all as far as a measure of less perceived risk.
I'm not sure that this is all that significant. The American consumer is tapped out, and the credit bubble has popped. Now all that debt has to either be written-off or slowly extinguished. Either way, it'll take years for American consumers to return to solvency, and until then the US is going to be very slow. Add to this the insolvency of the Fed Govt (just ask David Walker), and the inevitable and relentless increase in energy prices as supply continues to be unable to meet demand and we have some very rough times ahead.
Good.
Now that the crisis is over, can we end TAF, JPM's loan guarantees, etc?
ipodius - It's not their loans (which are shit and cratering), it's their debt, & the CDS. If they fail the bondholders could get the shaft since I am pretty sure the FHLB is made whole. The CDS explosion is what Ben can't allow.
"barely writes:
ipodius - It's not their loans (which are shit and cratering), it's their debt, & the CDS. If they fail the bondholders could get the shaft since I am pretty sure the FHLB is made whole. The CDS explosion is what Ben can't allow."
CFC is a large institution, and there is no doubt that the authorities will want it taken out cleanly, with the debt holders made whole.
But they're not going to get hysterical about the CDS payoff. BSC was a different case - they are a broker and CDS counterparty, and the risk is that the inter-dealer market would collapse. CFC is just a reference entity; the CDS market has dealt with bankruptcies before (despite the hyper-ventilations from some on the internets). Since CFC would dismembered between the bank and non-bank portions, it may be that there are buyers for both parts, making the debt holders largely whole (limiting the CDS payout).
Getting back on topic, the TED spread will keep narrowing. Unless of course, things get worse. But even if things don't deteriorate markedly, the credit markets typically shut down in the summer. Spreads will probably whip around on no volume; not really offering much information.
Any new info on the rumors that false numbers were being fed into the LIBOR? The version I read was that the LIBOR was being held artificially low. Since this made many lending rates cheaper than they "should have been," I never got a clear idea what the motive for the alleged manipulation was.
"Billy Hill writes:
Any new info on the rumors that false numbers were being fed into the LIBOR? The version I read was that the LIBOR was being held artificially low. Since this made many lending rates cheaper than they "should have been," I never got a clear idea what the motive for the alleged manipulation was."
Motivation: LIBOR rates posted by banks are public, and they are the rate that the bank says that it could borrow at. If a bank posted a real ugly rate (i.e., it's having to pay a big spread in the interbank market), a bank run could easily be started...
Motivation: LIBOR rates posted by banks are public, and they are the rate that the bank says that it could borrow at. If a bank posted a real ugly rate (i.e., it's having to pay a big spread in the interbank market), a bank run could easily be started...
Thanks, Bond Guy. I think this is the key issue. The LIBOR is an average which is made public. However, are the individual numbers that go into LIBOR public? It is those individual numbers that it is claimed are misreprented. It also seems to me that a single LIBOR liar acting on its own would not have much effect on the average, especially since the LIBOR calculators throw out highest and lowest before doing calculation.
bond guy:
"If a bank posted a real ugly rate (i.e., it's having to pay a big spread in the interbank market), a bank run could easily be started..."
Wow. Is it that bad??
what if all banks are posting a lower LIBOR number ?
at that point they all will say:
WOW I am paying way above the avergae. My situation must be bad....
I am looking for some help here ... I am operating under the assumption that erosion of the dollar and continued printing of money will be the dominant factors in the foreseeable future.
So with that in mind, I am hedging with swiss francs - or specifically, the FXF ETF. It's done very well for me since end of q3 last year. My thoughts were that it got me out of the dollar, it positions me to benefit if whatever is left of the swiss carry trade unwinds, and keeps me from holding a (possibly) overbought Euro.
So, any comments on swiss francs as a dollar inflation hedge now and going forward - especially if there is greater turmoil and possibly more extreme dollar drops in the future ?
Is there some particular risk that the swiss franc exposes me to that I am perhaps not aware of ?
All comments greatly appreciated.
With Fed
Bear Bailout/29Bill taxpayer backstop
TSLF, PDCF, TAF
ABS, MBS, impaired asset lending
non-bank lending
non-US bank lending
timing & market manipulations
unceasing rate cuts
banks hoarding/not lending
severe consumer retrenchment
CDS market still very unstable due to counterparty risk
BK, defaults, insolvencies on rise AKA confessional
Credit crisis may have abated, I do NOT think it has yet reached its low point, the real deep bloodletting can and must occur...and will sooner than later. Even severe reflating, hyperinflation cannot stop it. Still a zero sum game