credit markets: Comments on todays CBO Projections - 03/20/09 03:08 PM
So this afternoon the Congressional Budget Office or CBO released their updated budget projections for the US government and the numbers are both a shocker and a head scratcher. They are now projecting the US gov to run budget deficits, of $1.8 Trillion this year and $1.4 Trillion next year. That is the US government is projected to spend nearly 75% more money than they took in via taxes this year, and another similar percentage next year. To put this in perspective our budget deficit the last four years was about the same as what we'll now have in a single … (7 comments)
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credit markets: Fractional reserve banking and FED incompetence - 03/18/09 11:58 PM
Going off the reservation on another financial rant/post today...
The other day I saw this great post explaining Fractional Reserve Banking in really simple terms. It really lays the foundation for why our Federal Reserve and Treasury's policies not just now but over the last decade have helped lead us to where we are now and have actually been a main contributor to our worsening financial crisis.Without going into the details of how it works (follow the link if you want a clear explanation), fractional reserve banking is the type of banking system that the US and pretty much every … (7 comments)
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credit markets: The next big asset bubble - 03/18/09 04:34 PM
We've all seen several prominent asset bubbles and their collapses in the last decade. The collapse of the stock market in 2000 and again in the last year, the ongoing "housing bubble" bursting, a less talked about but no less spectacular recent collapse in the commodities and corporate debt markets. A bubble is usually used to refer to a boom that gets so far away from fundamentals and often purely driven by psychology or artificial attempts to keeps the good times rolling. Boom and busts are a natural economic cycle, where the principal "The bigger they are, the harder they fall" … (12 comments)
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credit markets: Look At The Dollar Rocket - 10/21/08 11:24 PM
One of my 10 predictions at the start of the year was despite the forecasts of most, was the US dollar was going to strengthen against foreign currencies during the year. Well in the last couple weeks the dollar has been on an absolutely impressive tear against almost every currency in the world. The ferocity of this move has simply been amazing, with it moving almost nearly 3% against a basket of currencies in just the last 24 hours. Think of it this way, your dollar in your pocket just got 3% more valuable in the last day, even if it … (20 comments)
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credit markets: Credit Market Update - A False Recovery??? - 10/21/08 12:21 PM
It's now been just over a week since the FED, treasury and central banks around the world made some massive interventions to try and stabilize the credit markets. My prediction is that these interventions would do very little to unlock the credit markets the main issue is trust, not liquidity. I've been watching many different indicators very closely for signs of recovery over the last week.
One of the main indicators of health in the credit markets is call the TED Spread. I've discussed it many times on this blog but it's basically the spread between three month treasuries and three … (11 comments)
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credit markets: The TRUTH Behind The Credit Market Lockup - 10/15/08 10:47 PM
The truth behind the credit market lockup has nothing to do with liquidity or lack of capital in the system, it is literally about TRUTH itself. Let me list a few examples that illustrate my point.
In March, Bear Stearns' CEO goes on national TV and claims they are well capitalized and don't have a liquidity problem. This statement is backed up from the SEC a regulatory agency in charge of monitoring Bear Stearns. Only a week later Bear Stearns collapses and we later learn, they did not just have liquidity problems but were in fact insolvent (effectively bankrupt) by a … (17 comments)
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credit markets: You Call That a Bailout, THIS is a Bailout - 10/13/08 07:00 PM
Boy, it's Monday and there is already a years worth of news to report on the bailouts, credit markets and the global economy. The central banks the world game out of the G7 meetings with a real fire lit underneith them, some might say desperate and have been enacting financial measures almost hourly in an attempt to unstop the credit markets. There seems to be a lot of throwing *#$ against the wall to see what sticks, if the markets don't react something that is announced, forget about it and announce something different.
Lets start with the US
An updated bailout … (15 comments)
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credit markets: Credit Market Update For The Week - Bond Market Dislocates - 10/11/08 05:35 PM
Sorry, I didn't get a chance to do updates during the week, things were moving so fast that I barely had the time to keep on top of them myself. Pretty much everybody is fixated on the "crash" in the stock markets with major US indexes plunging about 17% on the week, but equity markets are just a symptom, it's important to look at the cause.
The deterioration in the credit markets on a daily basis was simply stunning, and resulted in a near lock down of both intrabank lending and financial commercial paper markets by the end of the week.
… (32 comments)
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credit markets: Thursday Bailout and Credit Market Comments - 10/02/08 12:16 PM
I haven't given an update in a few days since I've been stuck in meetings all day. Here's where we stand with things, after Congress surprisingly rejected the bailout bill in front on them on Monday, Senate took the lead in reintroducing and yesterday voting for a revised bill.
The bill passed by the Congress by a vote of 74-25 on Wednesday night is now up to 400 pages, and at the core is the same bill, just now loaded up with billions and billions of additional sweeteners. These "sweeteners" include over $100B in tax breaks mainly to corporations to help … (12 comments)
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credit markets: Monday Bailout Comments and A Solution - 09/29/08 05:54 PM
I got off my flight down to Los Angeles a few hours ago and was pleased to see that Congress had rejected the bailout bill, woops I mean Financial Stability Act. I would not be surprised though to see it come back from the dead, given the fear today's large stock market drop will put into many politicians.
In many previous posts I've talked about how this proposed bill simply was throwing money into a fire and would do nothing to solve the fundamental economic problems or even unfreeze the credit markets. I've referenced many alternative plans by various economists and … (25 comments)
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credit markets: Sunday Bailout Update - Pretty Much a Done Deal - 09/28/08 10:48 PM
The last remaining significant resistance in Congress and the Senate has appears to have crumbled tonight and party leaders announced that they believe that the bailout is a done deal with voting in the house starting tomorrow. At 9:00 EST the Treasury department held a conference call with primary dealers to fill them in on the details and discuss implementation of the plan. According to reports from someone present on the call the treasury was very pleased with the final bill in that they got their money, with no real checks on their control and only token oversight. It was admitted … (24 comments)
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credit markets: The WaMu Seizure and Capital Market Consequences - 09/28/08 05:01 PM
Outside of the bailout bill currently under debate probably the biggest news last week was the failure of the largest thrift in our nation, Seattle based Washington Mutual. On Thursday, the FDIC took the step of seizing WaMu due to them being vastly under-capitalized. The deposits and some other assets were firesaled to JP Morgan for $1.9B, depositors were protected while both stock and bond holders were declared wiped out. This represents a marked difference from how previous bank failures have been handled by the FDIC, a change to the game plan if you will. Not withstanding he potential sweet deal … (11 comments)
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credit markets: Three More Massive Banks on the Brink - 09/27/08 05:42 PM
Today there are reports coming out of three massive banks currently on the brink of financial meltdowns. The situation at Belgium's Fortis bank with total assets of about $780 Billion appears most dire with Belgium's central bank trying to craft a rescue plan before Monday. Over in England talks to save one of the countries largest independent banks Bradford & Bingley are taking place throughout the night. More than likely B&B will end up being nationalized by the British government by the end of the weekend.
Back in the US the situation at our sixth largest bank Wachovia with assets of … (19 comments)
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credit markets: Failure is Important - 09/27/08 12:00 PM
If you can't guess from my previous dozen posts in the last week, I'm referencing what's going on in our financial system right now and the bailout bill. One of my biggest arguments with much of the government intervention in the past year and in particular the bailout in front of Congress is it attempts to artificially prop up companies who would otherwise have failed. There are many pundits that will talk about how it's in our interest to support these companies because it's needed to help the economy recover, keep us from loosing jobs, etc. No, No, No, let me … (18 comments)
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credit markets: Monday Market Recap and Bailout Implications - 09/22/08 10:48 PM
I was trying to write a post about the what todays markets (stocks,bonds,commodities) are saying about the proposed $700B bailout and the implications. Alas, sleep deprivation is starting to get to me, and writing coherent sentances just isn't working right now. After not sleeping a whole lot the past four days due to Blog World, I've been wrapped up in a bunch of activism around the proposed bailout (faxing/calling/emailing various officials), and also working hard on my new and very exciting startup.
Luckily, a blogger Karl Denninger over at the Market Ticker Blog who I follow very closely did a great … (11 comments)
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credit markets: The "No Banker Left Behind Act" of 2008 - 09/20/08 09:23 PM
With the situations in the credit markets becoming increasingly dire on Friday and threatening the systematic collapse of many large financial firms the US Treasury and Federal Reserve held an emergency meeting with Senators and Congressman. According to Senator Dodd, "The Oxygen went out of the room" when after the situation was explained and there was a silence of 10-15 seconds in the room as what had been said sank in.
“When you listened to him describe it you gulped," said Senator Charles E. Schumer, Democrat of New York.As Senator Christopher J. Dodd, Democrat of Connecticut and chairman of the Banking, … (22 comments)
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credit markets: Friday Morning Credit Market Update - 09/19/08 09:26 AM
Well I'm down in Vegas now for Real Estate Blog World so not exactly following stuff real time but there's been an amazing amount of action in the last 24 hours so I'll recap it.
RTC Version 2.0
The Federal Reserve and the Treasury are now pushing a plan to setup a half a trillion dollar trust where financial institutions can dump the bad debt on their balance sheets. This is similar to the Resolution Trust Corp (RTC) that was created at the end of the S&L bailout back in the the early 90's. One key difference being this is being … (7 comments)
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credit markets: AIG is Nationalized and the Next Big Financial Crisis - 09/17/08 10:01 AM
Late last night the governments hand was finally forced with crisis at the worlds largest insurer AIG, by for all intents and purposes nationalizing the company. The FED made a $85 billion, yes billion with a 'B', loan to AIG and the US government received a 80% equity stake in the AIG. The action was a last minute attempt to avoid the impending trillion dollar bankruptcy of AIG this morning due to collateral calls on their credit default swaps. This likely would have caused a massive ripple of effects through the worlds financial system. Something tells me a lot of the … (14 comments)
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credit markets: Mid-day update - It's all About AIG - 09/16/08 12:43 PM
Since for some sick reason I'm glued to my computer screen watching various news feeds come in, and have been talking to buddies in finance all day. I thought I'd give a mid day update on the ongoing crisis unfolding in the markets, though truthfully it's was set in motion years ago. If anybody doesn't know, the state of our financial system right now is hanging on the fate of massive credit insurer AIG. They've effectively got less than 24 hours right now to get access to about $70 Billion in capital to cover margin calls or we will see the … (28 comments)
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credit markets: The short fuse is now lit on AIG - 09/15/08 07:48 PM
The biggest driver in the market today wasn't the collapse of Lehman Brothers but rather the implosion happening at the worlds largest insurer AIG. AIG's been writing hundreds of billions of credit default swaps like they we're going out of style the last several years and if they go down the effects throughout the whole worlds financial system will be enourmous. After AIG's stock price dove last week and the FED balked at providing emergency loans to them over the weekend, their stock collapsed over 50% today.
Soon after market close Fitch downgraded their credit rating on AIG. Minutes ago, a … (24 comments)
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