Hi. Sorry about the erratic posting schedule. Life and my real job have been demanding. And yes it is black Monday if you are a Pats fan. Congratulations Team Williams (ack-- can't bring myself to say G-G-GIAN...) Actually I can't bring myself to say anything. The incomparable Bill Simmons summed it all up for PatsNation in his 3AM column. Read it and weep.
Only have time to post in shorthand today.. beginning with the latest on the obscure bond insurers that may or may not take down the global financial system. Hedgeworld (Registration required) had some interesting comments from one of the monolines' alleged rescurers, Wilber Ross, from last week. QUOTE: "Answering a question about the likelihood of defaults in the sector, Mr. Ross said, "This will come to an end very quickly, probably within the next month or so." He said there will be "fewer players within the industry and it will look more like what it used to look like before. It was a perfectly sound business then. But apparently, with the encouragement of the rating agencies, the insurers decided to diversify into all kinds of things, including [collateralized debt obligations]-squared. That's when they got in trouble." The so-called CDO-squareds are CDOs backed by other CDOs and are considered risky derivatives instruments. The risk began to compound as those monolines not only insured the bonds but invested in them for their own portfolios, using leverage as high as 101 times, Mr. Ross said. "One problem is that there is a real limit to how much capital one can put into these deals [to insure them]; and the second problem was that these portfolios tend to be very opaque," he said.
Other private equity types apparently took a look around and also said "thanks but no thanks" according to the Financial Times (and Hat Tip to CalculatedRisk for pointing out the money quote from that story:) "If we worry that we can get shot from the shadows by something we can't see coming, it is not for us," says the managing director in charge of financial service investments for one of the leading private equity funds. "The financial guarantors pass neither the shadow test nor the ability-to-understand test."
And here's some background on fund manager Bill Ackman, who first tried to figure out a rescue for, and is now trying to expose the insolvency of, the monolines. (Will he end up being known as the guy who killed the equity markets?)
But hey, at least the monoline bosses got their bonuses this year! Good on 'ya boys!
And while we're fretting about bonds.. the bond part of the "teaser freezer" plan isn't working. Surprised?
CalculatedRisk has been delving into the "Jingle Mail" phenomenon (when your home equity goes negative and you mail your keys to the lender and walk away). CR links to a good Financial Times piece on it. And web sites that'll help you do it are starting to appear.
And CalculatedRisk (again) gets us ready for Bank Writedowns II: Commercial Real Estate.
In case you missed it, Paul Krugman had a good column about how the most substantive of the Democratic candidates couldn't overcome superficial coverage of his campaign. But John Edwards' ideas pushed his competitors to beef up their policies and moved them to more progressive positions, on health care for example.
Get yourself a WSJ subscription, people, so you can read this entire piece about rogue trader Jerome Kerviel and how the whole thing was an exercise in class warfare.
And just to prove I haven't lost my sense of humor completely, this Joel Stein column made me laugh. (Yes, I know, it's sick to laugh at our collective misery. Sue me.)
And for so many delicious reasons, this was the ad of the night last night (e*Trade-- a company in an-- errrr, ummmm-- precarious financial position buys S---- B--- [sorry can't say those 2 words] ads to trumpet their insanely high yield savings accounts [think there's a reason for that?] and selling the idea that trading stocks is so easy even a baby can do it). Apply the baby's reaction to: the state of the financial markets, the Game, life in general. Let's get on with Super Tuesday already.