August, 2011
Buffett’s $1bn day at the office [updated]
Don’t call it a bail-out.
Our apologies for another BofA post but analyst reaction has been coming in and though most it can be summed as “confidence boost that changes little”, we think there’s a couple of extra points worth mentioning.
Searching for Büffet
There was an interesting close in Europe on Thursday:
Bloomberg reports that DAX futures “fell as much as 4.1 percent as a cascade of trades pushed the volume in the contracts to a quarter of the daily average between 3:45 p.m.
Buffett’s bargain BofA deal
By John McDermott, Cardiff Garcia, and Joseph Cotterill
BofA’s Buffett bounce was at 13 per cent at pixel time, paring gains from a 20 per cent high earlier on Thursday. Part of this may be due to a reverse torpedo-like situation, according to the experts at Data Explorers.
How to value a Greek bond like a CDO, part two
Ce contexte spécifique et la liquidité très faible du marché de la dette grecque a conduit le groupe Crédit Agricole S.A. à valoriser, au 30 juin 2011, ces instruments en « mark to model » et à les classer en niveau 3,
Woah, BAC up
Well, Warren Buffett did say he wanted to pay higher taxes, and we suppose his investment into Bank of America resembles something like a boon to Treasury, even if it’s just a sense of relief.
A quick market reaction while we get a grip on this:
This is not a Bank of America capital increase
Compare:
CHARLOTTE, N.C.–(BUSINESS WIRE)–Bank of America Corporation announced today that it reached an agreement to sell 50,000 shares of Cumulative Perpetual Preferred Stock with a liquidation value of $100,000 per share to Berkshire Hathaway,
Once Upon a Time in Underwriting
How do you make insurance interesting?
Admiral Group, the FTSE 100 motor insurer, chose to theme its interim results this week around the work of spaghetti western director Sergio Leone.
Founder and chief Executive Henry Engelhardt explained at the top of Wednesday’s analyst meeting:
Jedi Economics
If Paul Krugman (and others) are right, classical monetary policy goes out the window in a world where nominal interest rates are zero bound. All the usual monetary tools at the disposal of central bankers just don’t work.
Why yes, the Greek collateral grab is a big honking default risk
Over a week after FT Alphaville first revealed how Greece’s Finnish collateral “deal” threatened a default on its foreign-law bonds, given negative pledge clauses in the contracts…
From Handelsblatt on Thursday:
The diminishing returns of QE
The hypothetical QE3, whatever its format, might not work so well because the last two rounds were so successful.
That’s what Goldman analysts Sven Jari Stehn and colleagues say.
They’ve measured previous QEs by their effect on Goldman’s Financial Conditions Index,
Aliens to save the global economy
Alternative working title: When Orson Welles meets finance.
We discussed Fantasy Fed options on Wednesday. But here’s one from Paul Krugman, which we definitely overlooked — ironically, possibly the most fantastical of all.
Further reading
Elsewhere on Thursday,
- Return to the gold standard, and the Great Depression will look like a tea party.
- Ratings agency declares itself irrelevant (again).
- Stick to the talking points, BofA staff.
Pink picks
Comment, analysis and other offerings from Thursday’s FT,
John Gapper: HP should have avoided a big bang
When a chief executive unveils a new strategy to shareholders after nine months in the job,
Snap news
Breaking pre-market news on Thursday,
- Glencore adjusted EBIT up 50 per cent to $3.3bn — statement.
- Credit Agricole takes €202m charge on Greek bonds, deputy CEO denies recapitalisation plans — statement and Reuters.
Good luck, Steve.
PRESS RELEASE: Letter from Steve Jobs
August 24, 2011–To the Apple Board of Directors and the Apple Community:
I have always said if there ever came a day when I could no longer meet my duties and expectations as Apple’s CEO,
Further further reading
For the commute home,
- Another look at how much more the Fed can help the economy.
- Love is the opposite of underwear.
- The CBO’s annual summer update on the budget and the economy.
- Big banks:
How yields track nominal GDP changes
Yes, we know what happened today: gold down, dollar up, 10-year Treasury yields climbed to 2.30 per cent.
We heard. Jeeeeest a bit less room for Bernanke to let us down on Friday.
But if you think treasury yields are about to make a sustained,
Struggling back to neutral, (fiscal) policy edition
Or, if Ben won’t budge, then what?
We closed our last post by writing that “if policy is needed to offset household deleveraging and the corresponding reluctance of businesses to spend, help would have to come from the fiscal side.”
Struggling back to neutral, (monetary) policy edition
Ezra Klein has offered a name for the current situation that’s not nearly as sexy as the ones we came up with, but which is reasonable enough:
If it were up to me, we would call what we’re in a “household-debt crisis,” or something more elegant that gets the same idea across,
Robin Hood meets William Tell
This should make Davos a bit less tense; a win-win for the British and Swiss governments on Wednesday:
Aug 24 (Reuters) – Switzerland and Britain struck a deal on Wednesday to tax money kept by British residents in secret Swiss bank accounts,
Kiss of death for gold?
This was the gold price on Wednesday:
To describe the move as “tanking” — we think — is fair.
It comes just days after the GLD gold trust officially dethroned the SPY (S&P 500) fund as the largest ETF by market value.
Bank of America – not Citi and not being bought by JPM
Turns out that some banks don’t need sovereigns to create their own funding loop problems.
Not for the first time, Bank of America is in a league of its own.
It’s a quick point made by Marc Ostwald of Monument Securities on Tuesday,
Fantasy Fed options
While the world seems divided on whether Friday’s Jackson Hole meeting will result in the announcement of a fresh round of quantitative easing or not — we thought we’d run with the premise that QE in its conventional form is now redundant or impossible.
There are many ways to grab Greek collateral
From the WSJ, on that Greco-Finnish collateral deal:
The International Monetary Fund also opposes the agreement, because it could threaten the IMF’s customary “preferred creditor” status that ensures the fund is always first to be repaid,
An important lesson from Jackson Hole 2010
Alternative working title: How QE2 went wrong.
In order to understand what’s really at stake at Jackson Hole on Thursday we need first to understand how the Fed’s thinking has evolved post 2008.
And there’s an excellent presentation from Professor Lew Spellman,
Masochism
On the bright side, at least the ECB left more room to cut rates?
Chart via Rebecca Wilder and it’s more than a bit tongue in cheek. Correlation isn’t causation either. Although considering the state of the German economy over the same period…
ECB turbulence [updated]
Something to keep an eye on — there’s been a bit of a bump in bank borrowings from the ECB’s overnight Marginal Lending Facility:
Mostly because we can’t see an obvious explanation for it.
At €2.82bn it’s a jump up from the previous day’s €555m (or €90m before that),
Further reading
Elsewhere on Wednesday,
- On liquidity traps and powerlessness.
- Don’t take a eurobond to a debt overhang.
- Calling it the “household debt crisis”.
- Bank of America vs BI: “This is Investor Relations on acid.”
Pink picks
Comment, analysis and other offerings from Wednesday’s FT,
Martin Sandbu: Why western ways are still winning
The latest instalment of western declinism comes courtesy of Time, whose last front featured a crimson-tinged image of a masked English hoodie in front of a flaming car,
Snap news
Breaking pre-market news on Wednesday,
- Ageas takes gross Greek bonds impairment of €328m and initiates share buyback — statement and statement.
- Glencore makes A$0.87 per share offer for remaining shares in Minara Resources — statement.