October, 2011
The 50% haircut
Updated: Full statement (PDF)
Papandreou is now speaking. Here’s the live video feed.
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(Earlier):
The Barroso/Van Rumpuy presser just ended. Merkel is now taking questions; in German (which this blogger does not speak,
EBA: €106bn of bank capital needed — we think
Updated — We’ve added a bit more on how the EBA might treat convertible bonds as part of the capital targets. Also see the FT’s reporting on the issue.
The key chart from the European Banking Authority’s release late on Wednesday night (featuring as its target the widely trailed 9 per cent Core Tier 1 capital rato for banks):
Further further reading
For the commute home,
- Carl Icahn bans leaks about Carl Icahn.
- On complexity and nations’ future growth.
- The importance of cities to the trade balance.
- What US consumers have been spending money on since 2007.
Emergency Markets Live transcript 26 Oct 2011
Markets Live chat transcript for the chat ending at 20:16 on 26 Oct 2011. Participants in this chat were: Izabella Kaminska Joseph Cotterill, FT Cardiff Garcia John McDermott, FT IKDziedobry
Emergency Markets Live starting right now
The end of peace and prosperity, Italy gets blanked and then responds (or promises to respond by November 15). Then a draft statement or two and an invasion of Europe by the Polish language.
And as the EU17 approaches either its Waterloo or Valhalla,
Europe meets, talks, leaks, fights and still we wait
It’s all happening in Brussels. But don’t confuse activity with action.
The European Council summit (i.e. all leaders of the European Union) has concluded and the leaders of Poland (which currently holds the rotating Presidency) have been out briefing the press:
SEC takes another crack at Gupta (and Rajaratnam)
The newly released SEC and FBI complaints against Rajat Gupta detail the alleged evidence of insider trading by the ex-McKinsey boss.
As the FT suggested Wednesday morning, Buffett’s investment in Goldman Sachs forms a key part of both cases,
Who wants to be a Greek bond holdout?
Depends on what the “holdout” position is, maybe.
First though, we just can’t resist peeking at the latest in the Greek restructuring (re)negotiations.
Rumours about the new Greek private bondholder haircut are changing seemingly minute by minute at pixel time,
Fitch: Russian gold = Russian risks
Talk about obvious:
[Russian gold and silver producer] Polymetal plans to swap its Russian listing for a place on the main market of the London Stock Exchange and is also expected to enter the FTSE 100 index.
Rajat Gupta surrenders to the Feds
Rajat Gupta, former boss of McKinsey and Goldman Sachs board member, on Wednesday morning surrendered to the FBI, pending criminal charges for insider trading.
This would be a big scalp for the Feds — bigger even than that of Gupta’s friend, Raj Rajaratnam,
Eurozone running out of knights
Knights in shining armour that is.
The recently-floated plan for the big emerging markets to send money to Europe via an IMF-led SPV, which could be used alongside the EFSF to buy sovereign debt, is getting the lead balloon treatment.
Harp-ing on about housing
One part of Obama’s new refi plan that remains open-ended is exactly which changes to rep and warranty exposure will be granted to originators. Since the potential for putbacks has been one of the biggest obstacles standing in the way of more Harp participation,
Welcome to the European bank recap jungle
It gets worse here every day, et cetera.
The FT’s Peter Spiegel has a bit of tonight’s draft eurozone statement as it pertains to bank recapitalisation:
There is broad agreement on requiring a significantly higher capital ratio of 9 per cent of the highest quality capital and after accounting for market valuation of sovereign debt exposures,
How ‘Delta One’ really works
One thing we’ve learnt about Delta One is that it’s head-scratchingly, mind-bogglingly tricky to explain.
And exactly how the division makes money, outside of the fees it charges investors is even harder to work out.
Markets Live transcript 26 Oct 2011
Markets Live chat transcript for the chat ending at 11:16 on 26 Oct 2011. Participants in this chat were: Bryce Elder/FT Joseph Cotterill, FT Lisa Pollack, FT BESo here we are BEIt’s the big day.
(Mis)pricing the UK
Has the bond market got it right when it comes to the UK?
On Tuesday, Lex investigated why the UK can raise debt at substantially cheaper levels than its eurozone counterparts, in particular France.
WTI squeeze theory gains ground
What flipped WTI so quickly and severely into backwardation?
Increasingly, a consensus is forming that it was nothing more than a short squeeze. We’ve mentioned this before, but here are some more thoughts from the analyst community on Wednesday.
Building a better bank recap, discount curve edition
At some point on Wednesday, eurozone governments will say they want banks to find an unspecified amount capital, based on revised sovereign haircuts which… we still don’t know a lot about.
We know that sovereign bond positions will be marked down,
Further reading
Elsewhere on Wednesday,
- Finance. What’s it good for anyway?
- Meanwhile, Islamic finance should go back to basics.
- Chatting to your buds on Bloomberg, it’s “collaboration”.
- Defining, and crossing,
Pink picks
Comment, analysis and other offerings from Wednesday’s FT,
Martin Wolf: Be bold, Mario, put out that fire
Dear Mario,
Congratulations and commiserations: next week, you will take up one of the most important central banking jobs in the world;
Snap news
Breaking pre-market news on Wednesday,
- Lehman’s joint chapter 11 plan gets support from creditors holding over $160bn in claims – Reuters.
- PSA Peugeot warns on automotive profit, cash flow – statement.
Further further reading
For the commute home,
- Have any new ideas come out of the financial crisis?
- Taibbi’s latest: “Wall Street Isn’t Winning – It’s Cheating.”
- Proposing a financial transaction tax for ETFs.
The history and future of banking, according to Andy Haldane
Andy Haldane’s latest speech is a coherent, logically argued history of modern banking that ends with four intriguing policy ideas. The Bank of England’s Executive Director, Financial Stability, is always worth reading but his Wincott Annual Memorial Lecture,
Money managers and commodities, the case against
Here’s an interesting chart from the EDHEC-Risk Institute’s latest report on long-short commodity investing:
For those who believe that a build-up in long positions by money managers was responsible for fuelling the 2008 record rally in commodities,
Volcker is all up in your bonus
In its present form, the Volcker rule has the potential to change compensation structures. Not only that, but the Volcker rule cares about what your intentions were when you executed a trade. Starting
Cheap China
China is cheap — at least on a price-to-book basis.
At 1.58x the P/BV of the MSCI China is still below the 2008/09 lows of 1.64x. At this level China is among the cheapest countries in the MSCI universe (Russia and Hungary are the cheapest) .
Netflix: live streaming turns to live drowning
We ‘fess — apart from when we’re enjoying our Friday Night Lights addiction, we haven’t been paying much attention to the rise and rise and rise and now fall of Netflix. But this is pretty spectacular:
US consumer “confidence” at recessionary levels
A list of antonyms for “confidence”: “uncertainty”, “disbelief”, “carefulness”, “caution”, “circumspection”, “prudence”, “unconfidence”.
[That last one... really? - Ed. Well, thesaurus.com says so.]
Anyways,
SAC Capital referred for “unusually prescient” trades
The WSJ has got its hands on a list of the 18 “well-timed” SAC Capital trades referred by Finra or its predecessor NASD to the SEC between 2002 and 2011:
Finra, though, “described SAC’s history of well-timed trades as unusually prescient and particularly profitable”,
MF Global’s eurozone trades
Just fishing this out of MF Global’s fiscal Q2 results…
These repo trades are the ones against which MF Global was recently told to back with more capital. Moody’s said on Monday that the move ”raises questions about the firm’s risk governance”,