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ANZAC Day edition
The original ANZACs were the Australian and New Zealand Army Corps. They landed on 25 April 1915 at Galipoli in the Dardenelles for what was to become a protracted and punishing military defeat.
Australians (and New Zealanders) still commemorate Anzac Day
as their national day of remembrance and with numerous dawn services,
remembrance parades followed by war stories, stories about the (great)
grandkids and drinking with your mates. It’s a day that is both sombre
and joyous, reverential and light-hearted. We remember our dead in a
peculiarly Australian fashion.
as their national day of remembrance and with numerous dawn services,
remembrance parades followed by war stories, stories about the (great)
grandkids and drinking with your mates. It’s a day that is both sombre
and joyous, reverential and light-hearted. We remember our dead in a
peculiarly Australian fashion.
Liquidity and banks - a primer
Several of the responses to the last post (about bank excess liquidity) seemed to confuse liquidity and solvency. Indeed several confused “cash reserves” with “loan loss reserves” and the like.
Aaron Krowne – a fairly sophisticated guy and the proprietor of the Mortgage Implode-O-Meter for instance suggested that the 170 billion in cash is necessary to meet loan losses.
Let’s get this right. A bank’s liquidity goes down when they lend money. They lend their liquidity.
A
bank’s liquidity does not go down when there are loan losses. You do
not need cash to deal with loan losses. You need net worth to ...<< MORE >>
bank’s liquidity does not go down when there are loan losses. You do
not need cash to deal with loan losses. You need net worth to ...<< MORE >>
Mixed up policy responses and liquidity preference
I frequently get emails suggesting that governments should force
banks to lend and that would solve the recession. I tend to agree but
it would be difficult – and the government actions to date have
exacerbated the lack of lending.
banks to lend and that would solve the recession. I tend to agree but
it would be difficult – and the government actions to date have
exacerbated the lack of lending.
As it is,
there is little to no balance sheet growth at any major bank in America
and aggregate bank lending is falling. Excess cash at the Federal
Reserve is building up fast. The economy is still sour (and getting
more so) and bank credit losses are continuing to rise.
there is little to no balance sheet growth at any major bank in America
and aggregate bank lending is falling. Excess cash at the Federal
Reserve is building up fast. The economy is still sour (and getting
more so) and bank credit losses are continuing to rise.
Meanwhile banks sit on cash.
Welcome to the 21st Century
An AIG business that did not lose (much) money
AIG has sold 21st Century to Zurich. 21st Century is not a bad personal lines insurance company. I blogged about it here (arguing that the CEO of that unit deserved his bonus).
Anyway 21st Century was always partly owned by AIG but they took it private in 2007 buying the 39 percent they did not own for 813 million. That valued 21st Century at just shy of $2.1 billion.
They just sold it to Zurich for $1.9 billion. Zurich also assumed unit debt.
Hell – they are down less than ten ...<< MORE >>
Bramdean did reply
My last post about Bramdean Asset Management observed
that Bramdean had sent money to an un-named fund and received it back
the same day. This was done for "regulatory purposes".I
presume that there must be a legitimate reason for doing this - but to
date I have not found one and nobody has identified one. I still seek
assistance.Several people in
comments have suggested nefarious regulatory purposes are possible -
with the best example being a lawyer who transferred considerable trust
funds to his own account for one hour ...<< MORE >>
Goldman's Orphan Month
Goldman Sachs just put out pretty good results and did a big capital raising.
Here
is a table for Goldman Sach’s revenue for the three months ended Feb
2008, Nov 2008 and March 2009 respectively. The table comes from the
8K dated 13 April 09 – essentially the 8K in which they announced
results to raise money.
is a table for Goldman Sach’s revenue for the three months ended Feb
2008, Nov 2008 and March 2009 respectively. The table comes from the
8K dated 13 April 09 – essentially the 8K in which they announced
results to raise money.
That is right. Goldman Sachs changed
its balance date – and there is a ...<< MORE >>
its balance date – and there is a ...<< MORE >>
Bed and Breakfast capital at Bramdean Alternatives
I keep an eye on Bramdean Alternatives – the listed fund of hedge
funds and private equity funds run by Nicola Horlick’s Bramdean Asset
Management.
funds and private equity funds run by Nicola Horlick’s Bramdean Asset
Management.
What really interests me is the
capital calls on private equity – these being numbers large enough to
potentially bankrupt Bramdean Alternatives.
capital calls on private equity – these being numbers large enough to
potentially bankrupt Bramdean Alternatives.
So
far the capital calls have been manageable – but detailed disclosure
about how large they are and when they are due is not available.
Without that disclosure I am inclined to think the worst.
far the capital calls have been manageable – but detailed disclosure
about how large they are and when they are due is not available.
Without that disclosure I am inclined to think the worst.
Anyway the February "factsheet" contains the following gem (emphasis added):
Four capital calls were received from underlying Funds in February, though one of these was ...<< MORE >>
That Legacy Word
Toxic assets are no more. The Geithner Plan is officially a “legacy asset plan”.
Legacy assets sounds so much better than toxic assets.
By
contrast Chevron (latest security analysts conference call) has as its
first stated goal (in upstream business) to "grow profitably in core
areas and build new legacy positions".
contrast Chevron (latest security analysts conference call) has as its
first stated goal (in upstream business) to "grow profitably in core
areas and build new legacy positions".
The seemingly criminal Sheila Bair*
I am not opposed to the Geithner Plan – but the execution is bordering on criminal. This article in the FT runs as follows:
Bailed-out banks eye toxic asset buysBy Francesco Guerrera in New York and Krishna Guha in WashingtonPublished: April 2 2009 23:20 | Last updated: April 2 2009 23:57US
banks that have received government aid, including Citigroup, Goldman
Sachs, Morgan Stanley and JPMorgan Chase, are considering buying toxic
assets to be sold by rivals under the Treasury’s $1,000bn (£680bn) plan
to revive the financial system.The plans
proved controversial, with critics charging that the government’s
public-private partnership - which provide generous loans to investors
- ...<< MORE >>
A little bit of careful thinking - and why Krugman's despair is misplaced
I am not an economics academic. I gave that game away for the lure
of lucre and funds management. But this job throws up more than a few
ideas for publishable economics papers – whereas when I was a student I
was desperately short good ideas.
of lucre and funds management. But this job throws up more than a few
ideas for publishable economics papers – whereas when I was a student I
was desperately short good ideas.
Here is one – a pure throwaway – for anyone that wants it. (It’s a nice paper for a masters thesis.)*
It
has also explained neatly the problem of not getting banks to bring
assets to the Geithner Funds – and in a way which I suggest is
surprising.
has also explained neatly the problem of not getting banks to bring
assets to the Geithner Funds – and in a way which I suggest is
surprising.
It started as I tried to pick
apart Rortybomb’s analysis of the Geithner Plan. ...<< MORE >>
apart Rortybomb’s analysis of the Geithner Plan. ...<< MORE >>