tag:blogger.com,1999:blog-30643134.post72773041853753908..comments2023-12-26T01:10:26.319-05:00Comments on Accrued Interest: With our combined strength we can put an end to this destructive conflictAccrued Interesthttp://www.blogger.com/profile/05096191765979971184noreply@blogger.comBlogger26125tag:blogger.com,1999:blog-30643134.post-28900183765923551782009-02-04T04:31:00.000-05:002009-02-04T04:31:00.000-05:00Toxic assets are "lemon" products and lemon bankin...Toxic assets are "lemon" products and lemon banking (read on my blog): who is going to buy a lemon? Why support to lemons? Too much asymmetry in information not to say little information on these assets...Under these circumstances any auction and pricing is doomed to fail.M.G. https://www.blogger.com/profile/14140876295753661499noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-23104277014966624802007-09-09T14:47:00.000-05:002007-09-09T14:47:00.000-05:00An increase in the transactions velocity of money ...An increase in the transactions velocity of money (Vt) occurs/follows with most injections of legal reserves - even when temporary additions are "washed out". The 2 week infusion of excess legal reserves ending 8/15 stalled, and will minimize, any protracted drop in real-gdp. The present and temporary decline in the rate-of-change in monetary flows (MVt) will therefore not be as steep as anticipated. The current downswing in the economy ends Oct. 07. However, expect that the 4th qtr economic rebound will still be sharp.flow5https://www.blogger.com/profile/10233035883019771736noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-3651550156572881492007-09-08T11:50:00.000-05:002007-09-08T11:50:00.000-05:00I was merely implying that there is no love lost b...I was merely implying that there is no love lost between them. The rich are only clubby with each other as long as it is beneficial to do so. Anyway, if you are trying to claim Dimon/Prince/Me are self-interested, guilty as charged.Accrued Interesthttps://www.blogger.com/profile/05096191765979971184noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-22366361791348916552007-09-08T05:45:00.000-05:002007-09-08T05:45:00.000-05:00I'm certain that Jamie Dimon won't eat losses just...<I>I'm certain that Jamie Dimon won't eat losses just to help out Chuck Prince.</I><BR/><BR/>Are you trying to suggest something about the characters of the two named individuals? Tough business men? Hard-headed realists? Stalwart capitalists?<BR/><BR/>Where were Jamie and Chuck when the problem was being created?<BR/><BR/>Because, whatever else your post says, it says there is a problem.<BR/><BR/>Personally, I will go with Barney Frank and Bernie Sanders. Sorry.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-90652802329633749982007-09-07T21:50:00.000-05:002007-09-07T21:50:00.000-05:00Citi Summons LBO Vultures<A HREF="http://www.thestreet.com/_yahoo/s/citi-summons-lbo-vultures/newsanalysis/wallstreet/10378303.html" REL="nofollow">Citi Summons LBO Vultures</A>Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-25540030073152495592007-09-07T16:06:00.000-05:002007-09-07T16:06:00.000-05:00see Upton Sinclair post above.see Upton Sinclair post above.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-76554131446836484002007-09-07T16:00:00.000-05:002007-09-07T16:00:00.000-05:00Cripes. Greenspan was not saying 1987 is about to ...Cripes. Greenspan was not saying 1987 is about to happen again. He's comparing today to other liquidity crises. If anything we should consider his comparison when thinking about how the Fed will react.Accrued Interesthttps://www.blogger.com/profile/05096191765979971184noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-85306666235402584382007-09-07T15:59:00.000-05:002007-09-07T15:59:00.000-05:00First CreditSights, now MacroMan? Star Wars Geeks ...First CreditSights, now MacroMan? Star Wars Geeks Unite!Accrued Interesthttps://www.blogger.com/profile/05096191765979971184noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-76350773582844308342007-09-07T15:43:00.000-05:002007-09-07T15:43:00.000-05:00I guess you missed that Greenspan compared last si...I guess you missed that Greenspan compared last six weeks to 1987 today.<BR/><BR/>Requiem for the Riskloves. My haiku to the board, with love:<BR/><BR/>too much leverage<BR/>gives the Moonbats the chance <BR/>to play in the sunAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-19699415439753394662007-09-07T15:39:00.000-05:002007-09-07T15:39:00.000-05:00I thought your comment was annoying because it has...I thought your comment was annoying because it has no substance. You give no basis for your thoughts. I may as well claim a volcano is going to erupt under New York.<BR/><BR/>FYI, the fastest way to tell an investment pro that you are an amateur is to claim 1987 is about to happen again. We hear people claim this so often that it becomes like the guy holding an "end is near" sign on the corner. If you want to claim we're going into a long bear market, there is a legitimate case to be made. But 1987? There was such a strange confluence of factors that caused that specific crash. So to draw the conclusion that we're repeating that is tough. Very tough.Accrued Interesthttps://www.blogger.com/profile/05096191765979971184noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-30491006641469835472007-09-07T15:28:00.000-05:002007-09-07T15:28:00.000-05:00Did anyone notice our host's tone in responding to...Did anyone notice our host's tone in responding to my earlier post?<BR/><BR/>After denial, anger. <BR/><BR/>Upton Sinclair: Very difficult to get a man to understand something when his livliehood depends on him not understanding it.<BR/><BR/>Applies to most of the respondents here in objectively evaluating the historic events taking place.<BR/><BR/>Remember boyz, every Moonbat eventually has his day.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-70581602923785611022007-09-07T14:47:00.000-05:002007-09-07T14:47:00.000-05:00TDDG:http://macro-man.blogspot.com/2007/09/star-wa...TDDG:<BR/><BR/>http://macro-man.blogspot.com/2007/09/star-wars-guide-to-finance.htmlAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-53905248106780196112007-09-07T14:00:00.000-05:002007-09-07T14:00:00.000-05:00Does anyone else get tired of comments like that o...<I>Does anyone else get tired of comments like that one?</I> [tddg]<BR/><BR/>Very.<BR/><BR/>The only mitigating factor is that gold was not mentioned.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-36364571781483070282007-09-07T13:59:00.000-05:002007-09-07T13:59:00.000-05:00Does anyone else get tired of comments like that o...<I>Does anyone else get tired of comments like that one?</I> [tddg]<BR/><BR/>Its like what T.E. Lawrence said in <B>Lawrence of Arabia</B> when putting a match out, slowly, with his fingertips.<BR/><BR/><"The trick is *pause* not to mind the pain."Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-2640547597430099462007-09-07T13:21:00.000-05:002007-09-07T13:21:00.000-05:00Does anyone else get tired of comments like that o...Does anyone else get tired of comments like that one?Accrued Interesthttps://www.blogger.com/profile/05096191765979971184noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-28022469628457175022007-09-07T13:07:00.000-05:002007-09-07T13:07:00.000-05:00sivs=enron accountingloanco proposals=enron accoun...sivs=enron accounting<BR/><BR/>loanco proposals=enron accounting<BR/><BR/>works great til it doesn't <BR/><BR/>when it fails it fails ugly<BR/><BR/>GALBRAITH: there's no such thing as a financial innovation--<BR/><BR/>UGLY COMING<BR/><BR/>TOO MUCH LEVERAGE<BR/><BR/>only question left: will it be 87 or 29?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-24679789695384054082007-09-07T07:27:00.000-05:002007-09-07T07:27:00.000-05:00I love the conversation. I feel as though I've sai...I love the conversation. I feel as though I've said my peace in the post so I won't add much here.<BR/><BR/>1) LoanCo would be in essense a self-funded SIV or CDO. <BR/><BR/>2) The bridge loan problem isn't so large that it threatens these banks. Remember that the bridge lenders are only very large banks. Its more than they don't want them on their balance sheet for the next 10 years.<BR/><BR/>3) As dscr points out, I doubt very seriously that they'd be able to actually get together to form LoanCo. The more likely scenario is that banks work with some private equity types to put together a more independent version of LoanCo.Accrued Interesthttps://www.blogger.com/profile/05096191765979971184noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-49961679037239505122007-09-06T23:56:00.000-05:002007-09-06T23:56:00.000-05:00Also!I may be wrong, but I don't think putting the...Also!<BR/><BR/>I may be wrong, but I don't think putting the loans into LoanCo will, in and of itself, free up any balance sheet room. The size of their equity investment in LoanCo will be identical to the size of their fixed income investment in the loans held directly - unless they can obtain financing for LoanCo from other investors. <BR/><BR/>They might be able to get such financing, but as you say, that simply turns LoanCo into a SIV. That's one way to securitize, but I'm not convinced it's the fastest or surest way to get the stuff off their books completely.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-72669931903607870842007-09-06T23:38:00.000-05:002007-09-06T23:38:00.000-05:00dcsr - For sure, the banks would much rather secur...dcsr - For sure, the banks would much rather securitize and get rid of the loans, I'm not denying that. <BR/><BR/>I'm just thinking about maximizing the price when they do so. I don't know the term on these loans - maybe 5 years? Call it a modified duration of 4.25? <BR/><BR/>And maybe there's a risk weight of 8% for the credit, 3% for term, so on a $10-billion loan, risk-weighted assets are $1.1-billion so they've got to put up about $100-million capital to maintain their ratios. [Feel free to make fun of these numbers - I'm not a specialist and am just looking at a <A HREF="http://www.bis.org/publ/bcbs128b.pdf" REL="nofollow">BIS document</A>].<BR/><BR/>So first off, the return on capital from the carry isn't all that bad: 2% carry implies 200% return on capital.<BR/><BR/>I know they don't want the carry; I know that's not the business they want to be in. But that is the business in which they find themselves right now, willy-nilly.<BR/><BR/>More importantly, though, if they can lower the yield on a sale by 50bp on the 5-year loan, that's $200-million right away; and if they can make a credible case to the market that they're prepared to carry the loan, they've got a better chance of getting that 50bp reduction in spread.<BR/><BR/>Again, feel free to make fun of and change the numbers; I'm not a junk specialist, let alone a US junk specialist; I won't be offended. <BR/><BR/>I have, however, traded one or two bonds in my life, and wouldn't want to be the guy saying 'Gee, Mr. Kravis, the boss says I've got to sell these bonds by 5pm, what do you bid?'Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-66259515923995269352007-09-06T23:13:00.001-05:002007-09-06T23:13:00.001-05:00TDDG, great blog, you're creating some great discu...TDDG, great blog, you're creating some great discussion and have a good collection of commentors.<BR/><BR/>I also like the idea of a Loanco. Its actually similar to a conduit (SIV) vehicle. Many of these were bank issued vehicles that were financed via ABCP mkt. Balance sheet was freed up and risk was taken by the conduit shifted to CP investors. Obviously that business model is not in such good shape because the assets being pledeged to the vehicles are now in question, but that shouldn't be a problem for a loanco since this is capitalized by equity investments. The bigger issue the fact that all the banks have different collateral and will not likely agree on the prices of each other's debt contribution. That will be one crazy round table...Unknownhttps://www.blogger.com/profile/08906839257849091675noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-9791359266467351752007-09-06T23:13:00.000-05:002007-09-06T23:13:00.000-05:00The loans are an asset.Their asset value would not...The loans are an <I>asset</I>.<BR/><BR/>Their asset value would not change, to a first approximation but they might have to start marking-to-market (if they haven't done so already).<BR/><BR/>I'm not sure if their risk-weighted assets would change; they might be decreased. Risk-weighting rules <A HREF="http://www.econbrowser.com/archives/2007/09/comments_on_hou.html" REL="nofollow">favour securitization for mortgages</A>; I'm not enough of a specialist to know off-hand whether the same applies to loans - especially when there aren't thousands and thousands of these loans to securitize.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-4389109294364278292007-09-06T23:07:00.000-05:002007-09-06T23:07:00.000-05:00Re: JamesThe banks have carry on these positions f...Re: James<BR/><BR/>The banks have carry on these positions for certain, but the reason securitization has been so successful for them is because it gave a great way to turnover assets. <BR/><BR/>So for example, lets say a bank originates $1bn in loans to securitize. By securitizing they realize between 1 to 2 points of profit. Loans are freed from balance sheet and they are free to do it again. Originate, securitize, 1 to 2 points profit...rinse repeat. In CMBS Morgan Stanley leads the league tables in the 1st half with about $27bn in issuance, first half '07. I imagine their profit margin has been much lower this year, and probably negative with recent deals because spreads have widened out so much on them. Oh yeah, they also would make money on loan origination fees as well, not included in the 1 to 2 pts. Historically this has been a money machine. <BR/><BR/>Now compare this to your carry situation, you have $1bn in balance sheet eaten up for a year with say 1 pt of carry, which seems high to me. Unless your hedged (which would cost you), the whole $1bn is eating up balance sheet. This will cause some pretty crappy ROA numbers for your stock. Thats why banks are sucking wind now; they may have to sit with these loans eating up balance sheet, creating a drag on earnings and ROA and probably a bunch of other fancy ratios.Unknownhttps://www.blogger.com/profile/08906839257849091675noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-64604287659700174312007-09-06T22:51:00.000-05:002007-09-06T22:51:00.000-05:00The problem lies in the fact loanco is created by ...The problem lies in the fact loanco is created by banks, which have the ability to create money. When banks begin moving liabilities off the balance sheet they are essentially under reserving and not in compliance with reserve requirements. If a bank goes belly up then the taxpayers have to eat the cost through higher taxes etc..., if an medical insurance group goes belly up, some people are out of a job.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-18066271507097491642007-09-06T22:21:00.000-05:002007-09-06T22:21:00.000-05:00How about this one?Offer Morgan Stanley 10-years a...How about this one?<BR/><BR/>Offer Morgan Stanley 10-years at +80, convertable at holders' option at any time into TXU 10-years at +250.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-88257412297161507252007-09-06T20:51:00.000-05:002007-09-06T20:51:00.000-05:00I'm not convinced.There are already vulture funds ...I'm not convinced.<BR/><BR/>There are already vulture funds being formed to pick this stuff up and to a large extent it's just going to be staring contest until one side meets the other's price.<BR/><BR/>If the banks create an intermediary - which will, essentially, be a closed end fund - they will each give up a certain amount of control over how long they're prepared to sit. And selling off their interest in the diversified LoanCo would probably be harder than chipping away at their own holdings individually.<BR/><BR/>Additionally, contributions to LoanCo probably wouldn't be determined solely on the basis of credit quality and marketability - the capital requirements of the individual banks will have a huge influence on their positions at the bargaining table.<BR/><BR/>Presumably the banks have a large loss on their positions, but they also have a fat carry. I'd be tempted to build up my capital as best I could - delay dividend increases, stop share buybacks, issue Tier 1 Capital - and tell the market I'm prepared to sit on the paper until frickin' maturity if I have to.<BR/><BR/>If I put it in LoanCo, I'm telling Mr. Hedgie I'm scared and hoping to unwind.Anonymousnoreply@blogger.com