It is bizarro world for me to go to these things. First, let me confess right from the start, I had a great time. I pose as an outsider and a crank. But when summoned to the court, this jester puts on his bells. I am very, very angry at Treasury, and the administration it serves. But put me at a table with smart, articulate people who are willing to argue but who are otherwise pleasant towards me, and I will like them. One or two of the “senior Treasury officials” had the grace to be a bit creepy in their demeanor. But, cruelly, the rest were lively, thoughtful, and willing to engage as though we were equals. Occasionally, under attack, they expressed hints of frustration in their body language — the indignation of hardworking people unjustly accused. But they kept on in good spirits until their time was up. I like these people, and that renders me untrustworthy. Abstractly, I think some of them should be replaced and perhaps disgraced. But having chatted so cordially, I’m far less likely to take up pitchforks against them. Drawn to the Secretary’s conference room by curiosity, vanity, ambition, and conceit, I’ve been neutered a bit. There’s an irony to that, because some of the people I met with may have been neutered, in precisely the same way and to disastrous effect, by their own meetings and mentorings with the Robert Rubins and Jamie Dimons of the world.
Obviously the headline act was Timothy Geithner. Off the record (or “on deep background”), Geithner is entirely different from the sometimes stiff character who appears on television. He…
[C]onceivably, its failure could have resulted in a 1930’s-style global financial and economic meltdown, with catastrophic implication[s].
From July 2007, AIG’s financial situation deteriorated while so-called “AAA” collateralized debt obligations (CDOs) dropped in value. AIG sold credit default swaps (CDSs) on these CDOs and had to post more collateral, as the prices plummeted.
Goldman Sachs was AIGFP’s (UK-based AIG Financial Products) largest CDS counterparty with around $22.1 billion, or about one-third of the problematic trades. Goldman underwrote some of the CDOs underlying its own CDSs, and also underwrote a large portion of the CDOs against which French banks SocGen, Calyon, Bank of Montreal, and Wachovia bought CDS protection. Goldman provided pricing on these CDOs to SocGen and Calyon. Goldman was a key contributor to AIG’s liquidity strain and the resulting systemic risk. (See “Goldman’s Undisclosed Role in AIG’s Distress”)
By mid September 2008, AIG’s long-term credit rating was downgraded, its stock price plummeted, and AIG couldn’t meet its borrowing needs in the short-term credit markets. According to SIGTARP, “without outside intervention, the company faced bankruptcy, as it simply did not have the cash that was required to provide to AIGFP’s counterparties as collateral.” [P.9] The Federal Reserve Board with Treasury’s encouragement authorized a bailout. 2
The Federal Reserve Bank of New York (FRBNY) extended an $85 billion revolving credit facility, so AIG could make its collateral payments to Goldman and some of its CDO buyers. AIG also met other obligations, such as payments under its securities lending programs owed to Goldman and some of its CDO buyers. (See also: “AIG Discloses Counterparties to CDS, GIA, and Securities Lending Transactions.”)
Goldman “Would Have Realized a Loss”
Fed Chairman Bernanke said AIG’s crisis put the world at risk for a global financial meltdown. Goldman purchased little credit default protection3 against an AIG collapse. Even if Goldman escaped a collateral clawback of the billions it held from AIG4, the
On Monday, I was among a group of eight bloggers who attended a discussion with "senior Treasury officials" in Washington. Several nice accounts of that meeting have already been posted (see roundup below). Here’s mine.
First, I’d like to thank the "senior Treasury officials" for taking the time to meet with us, and for being very gracious hosts. Whatever disagreements one might have, in statistical if not moral terms it was an extreme privilege to sit across a conference table and have a chance to speak with these people. And despite the limitations of the event, I’d rather there be more of this kind of thing than less. So a sincere tip o’the hat to all of our hosts. Thank you for having us.
The second thing I’d like to discuss is corruption. Not, I hasten to add, the corruption of senior Treasury officials, but my own. As a slime mold with a cable modem, it was very flattering to be invited to a meeting at the US Treasury. A tour guide came through with two visitors before the meeting began, and chattily announced that the table I was sitting at had belonged to FDR. It very clearly was not the purpose of the meeting for policymakers to pick our brains. The e-mail invitation we received came from the Treasury’s department of Public Affairs. Treasury’s goal in meeting with us was to inform the public discussion of their past and continuing policies. (Note that I use the word "inform" in the sense outlined in a previous post. It is not about true or false, but about shaping behavior.)
Nevertheless, vanity outshines reason, and I could not help but hope that someone in the bowels of power had read my effluent and decided I should be part of the brain trust. The mere invitation made me more favorably disposed to policymakers. Further, sitting across a table transforms a television talking head into a human being, and cordial conversation with a human being creates a relationship. Most corrupt acts don’t take the form of clearly immoral choices. People fight those. Corruption thrives where there is a tension between institutional and interpersonal ethics. There is "the…
The chart below, which summarizes 5 years of Fed "forward guidance" on that most critical of variables - the Fed Funds rate - proves two things:
i) there is nothing worse in this world than being a Fed Funds, or Eurodollar, trader, considering 5 years of forecasts have been systematically destroyed by a Fed which has failed time and time and time again to stimulate the economy enough to push it away from ZIRP (and why any hope for the first rate hike in mid-2015 are idiotic), and
ii) when it comes to central planning, the economists that now openly control the bond and stock market and increasingly more of global capital flows, have absolutely no idea what tomorrow brings perversely, since it i...
Chinese manufacturing remains in contraction for 2014. Output and new orders were down for the 4th consecutive month, but at a slightly reduced pace according to the HSBC Flash China Manufacturing PMI.
Commenting on the Flash China Manufacturing PMI survey, Hongbin Qu, Chief Economist, China & Co - Head of Asian Economic Research at HSBC said:
“The HSBC Flash China Manufacturing PMI stabilised at 48.3 in April, up from 48.0 in March. Domestic demand showed mild improvement and deflationary pressures eased, but downside risks to growth are still evident...
We continue in this "V shaped" move off last week's touch of the 200 day moving average on the NASDAQ. The S&P 500 gained 0.41% and the NASDAQ 0.97%. The indexes are nearing overbought near term so a day or two of rest would serve the bulls well to try to attempt a new leg higher. In economic news existing home sales hit 4.59 million in March, versus a 4.55 million estimate.
In terms of the indexes the S&P 500 stalled at the trend line that connected the lows of summer 2013; some congestion lies ahead at year highs.
The NASDAQ has come back from deeply oversold conditions as this index is heavy with biotech and momentum stocks. The dotted blue line is the previous high; since early March we have not seen the NASDAQ make...
Bunge Limited (BG) is the world’s largest processor of soybeans. It is also a major producer of vegetable oils, fertilizer, sugar and bioenergy.
When commodities got hot in 2007-08, Bunge’s EPS shot up and the stock followed, rising 185% in 19 months.
The Great Recession took its toll on operations, dropping EPS to a low of $2.22 in 2009. Since then profits have recovered. They ranged from $4.62 - $5.90 in the latest three years. 2014 appears poised for a large increase. Consensus views from multiple sources see BG earning $7.04 - $7.10 this year and then $7.83 - $7.94 in 2015.
Shares in Las Vegas Sands Corp. (Ticker: LVS) are up sharply today, gaining as much as 5.7% to touch $80.12 and the highest level since April 4th, mirroring gains in shares of resort casino operator Wynn Resorts Ltd. (Ticker: WYNN). The move in Wynn shares appears, at least in part, to follow a big increase in target price from analysts at CLSA who upped their target on the ‘buy’ rated stock to $350 from $250 a share. CLSA also has a ‘buy’ rating on Las Vegas Sands with a $100 price target according to a note from reporter, Janet Freund, on Bloomberg. Both companies are scheduled to report first-quarter earnings after the closing bell on Thursday.
Yesterday, the market continued its winning ways for the fifth consecutive day. The S&P 500 closed within 1% of its all-time high, and the DJI was even closer to its all-time high. Healthcare, Energy and Technology led the sectors while Financials, Telecom, and Utilities finished slightly in the red. All three sectors in the red are typically flight-to-safety stocks, so despite lower than average volume, the market appears poised to make new highs.
Mid-cap Growth led the style/caps last week, up 2.87%, and Small-cap Growth trailed, up 2.22%. This week will bring well over 100 S&P 500 stocks reporting their March quarter earn...
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[Facebook] The social network is only weeks away from obtaining regulatory approval in Ireland for a service that would allow its users to store money on Facebook and use it to pay and exchange money with others, according to several people involved in the process.
The authorisation from Ireland’s central bank to become an “e-money” institution would allow ...
I just wanted to be sure you saw this. There’s a ‘live’ training webinar this Thursday, March 27th at Noon or 9:00 pm ET.
If GOOGLE, the NSA, and Steve Jobs all got together in a room with the task of building a tremendously accurate trading algorithm… it wouldn’t just be any ordinary system… it’d be the greatest trading algorithm in the world.
Well, I hate to break it to you though… they never got around to building it, but my friends at Market Tamer did.
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Ladies and Gentlemen, hobos and tramps,
Cross-eyed mosquitoes, and Bow-legged ants,
I come before you, To stand behind you,
To tell you something, I know nothing about.
And so the circus begins in Union Square, San Francisco for this weeks JP Morgan Healthcare Conference. Will the momentum from 2013, which carried the S&P Spider Biotech ETF to all time highs, carry on in 2014? The Biotech ETF beat the S&P by better than 3 points.
As I noted in my previous post, Biotechs Galore - IPOs and More, biotechs were rushing to IPOs so that venture capitalists could unwind their holdings (funds are usually 5-7 years), as well as take advantage of the opportune moment...
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