Pretty much everyone needs more credit analysts these days. New York Life Investment Management LLC, one of the largest managers of high yield and leveraged loans in the United States, wants to add a Credit Analyst to its Leveraged Loan team. Get on it!
Archive for November 2007
We’ve now ventured into the dangerous territory of financial accounting three times in the past two days to raise the possibility that the deep discount on asset backed securities obtained by Citadel when it bought E*Trade’s portfolio may amount to a major mark to market event for Wall Street. We knew when we started discussing this that the banks and brokerages would not be eager to make further write-downs to their ABS books. But what we didn’t know was that so many of our readers would be eager to provide the rationalizations for avoiding the mark downs.
We’re told that the bulk of E*Trade’s credit portfolio consisted of prime residential first lien loans. According to one E*Trade document DealBreaker has obtained, E*Trade had assigned a book value of $1.4 billion to mortgages rated AA or higher, $590 million were rated A, and $285 million were Triple B. With the secondary market for mortgages largely opaque—to the extent it exists at all these days—we thought it was rather obvious that a large public transaction in these securities should at least cause accountants to take a second look at their supposedly marked-to-market portfolios.
The main objection to viewing this as a mark-to-market event seems to be that because Citadel bought more than just asset backed securities and because the securities they did buy were a heterogeneous lot, it’s difficult if not impossible to derive a market price for the individual securities. This strikes us as a daring dodge but we’re trying to keep an open mind about this. Please feel free to explain in the comments below why further discounts of ABS books are not called for.
Donald Trump’s $2 billion proposal to build “the world’s greatest golf course” in Scotland, the home of his ancestors, has been shot down. Councilor Martin Ford, who cast the deciding vote against the 15-mile construction of two 18-hole golf courses, 950 apartments, 500 homes and a 450-room luxury hotel, said the wildlife damage it would cost would be “too high a price to pay,” though Trump claims that the area would “maintain its environmental integrity.” In one of those rare moments that you couldn’t say, “Wow, what an unjustifiably smug twat, he’s clearly only gotten this far on his looks,” Trump admitted that he was “surprised and disappointed.” Thank god he had the good sense to add, “The appeal should go rather quickly and successfully…This is what I do all my life. In the end it works out because I do succeed.” In other news, who knew Trump was Scottish? I certainly didn’t. Seriously, some days I am too stupid to function. Other days, no joke, I’m a fucking genius.
Trump’s In The Rough [NYP]
Hi, it’s Bess, Carney and I are tag teaming this post. Anyway, here’s my comment: HAHAHA OMG OMG OMG OMG isn’t the internet hilarious?!?!?! You are totally justified in clogging up your friends/colleagues/Dealbreaker’s inboxes with this shit and the message “Scroll down, TOO FUNNY!!!” LOLZ LOLZ LOLZ.
We like laying blame and we like public humiliation. (Ed.’s Note: this is where I wanted to end the post but Carney said I had to go into greater detail.) If you can add in something about “pretentious know-it-all dicks,” marry me? Hence, German finance minster Steinbrück’s comment to the Financial Times that the “snooty” attitude of bankers and financiers who believed themselves to be “cleverer than the others” is to blame for the credit crisis is pretty much our own personal perfect storm. Steinbrück also said that while these incompetent managers were guiding us into the current global “disaster,” they were also “mocking” and “deliberately misunderstanding” his proposal for increased transparency, which was genius and could’ve saved the planet. Pumping yourself up = cherry on top.
This is what we need more of. No more sidestepping the question of who’s to blame when things go wrong (assuming in the first place that $8.1 billion writeoffs aren’t right). No more blaming inanimate objects, or pretending to fall asleep when you should be flashing a picture on the screen of Jimmy Cayne meeting his dealer on Vanderbilt and the words “Is there a connection” with three or five questions marks and an exclamation point. Mack: Was the $3 billion writeoff Cruz’s fault? Cruz, is Mack making you the fall girl in a desperate attempt to justify the free set of steak knives he gets every year from William Henry? Let it out, you two.
‘Snooty’ bankers blamed for crisis [Financial Times]
The completely predictable caterwauling over the proxy access decision by the SEC has already begun.
“The tensions over proxy access may tarnish Mr. Cox’s image as a self-proclaimed investor advocate,” the Wall Street Journal’s Kara Scannell claims in an article the editors of the Journal headlined as “Cox Puts Legacy On The Line.”
We’ve said again and again that the so-called “proxy access” reforms were a bad idea. In the first place, this kind of corporate governance is best left to the states. What’s more, far from increasing the power of ordinary investors the move would have left them vulnerable to exploitation by special interests, especially union dominated pension funds.
For a while there, it looked like CNBC was going to keep doing its thing as the “serious” business network, and not lower itself to Fox’s, shall we say, looser format. “Skanks don’t move markets,” everyone* at Englewood Cliffs said during the first week of FB’s debut. “Those hos won’t last a month.” How wrong was CNBC? Dead wrong. An informal poll of five traders shows that Fox Business is still in fact on the air, almost two months later. This unforeseen turn of events has everyone in NJ wetting themselves in fear (why do you think they’re always behind a desk?) and scrabbling to tart it up in order to compete, with a more “ouch, what are you doing?” than pleasurable outcome. Take this morning, for example. A piece on Victoria’s Secret, a Limited Brands company carried the headline “Vicky’s Panty Raid,” Erin Burnett half-heartedly making a joke about “Becky Quick’s interesting Victoria’s Secret story,” and then a shot of Mark Haines eating a sandwich. It’s just sad because they don’t even know how to properly whore themselves out, and they’re fumbling around and fucking it up and just looking awkward. It’s like watching Dina Lohan trying to compete with Lindsay. Horribly depressing and giving me the worst case of secondhand embarrassment.
*Everyone, that is, but Kudlow, who insisted we give him credit for knowing that “Skanks *do* indeed move markets” from the beginning.
This is from the other day but, uh, perhaps there are one or two of you out there who don’t regularly watch Fox Business’s (fingers crossed) Emmy Award-winning “Happy Hour,” produced at the Waldorf’s Bull & Bear. I came across this segment while searching for a piece someone told me the show did yesterday on particle theory. But before I could find it, my eyes landed on this one, entitled, “Teenage NASCAR.” Who among us would be able to resist? None, myself included. Cody and Rebecca interview 17-year-old Joey Logano about the financial component of racing and what it’s like to be NASCAR jailbait (they also get him absolutely shitfaced and then request a spin in his 750 horsepower racing machine, which is just good TV). That’s not what I want you to focus on though. I want you to focus on Cody’s jacket. Watch it like you’ve never watched a jacket before. Watch it with the sound on, watch it with the sound off. Watch it on a boat, watch it with a goat. Watch it in the rain, watch it on a train. Watch it in a box, watch it with a fox. Watch it in a house, watch it with a mouse. Then start a letter writing campaign to Fox Business, petitioning that Cody Willard has to wear that jacket on every network appearance for the remainder of his contract. Then take a gander at this thing, which is equally mind-blowing and worthy of your time. You’ll want to plug your headphones in.
Teenage NASCAR Sensation [Fox Business]
We greeted the news of announcement yesterday that Citadel had picked up an asset backed securities portfolio from E*Trade in our usual curmudgeonly style. While investors celebrated the news by pushing E*Trade’s share price up, we noted that this probably should have the accountants at many Wall Street firms scrambling to reassess their own ABS portfolios.
It turns our we weren’t alone on this. Paul Kedrosky filed a two-part analysis of the Citadel deal yesterday, and sounded many of the same notes.
“First things first, the price on E-Trade’s ABS book. We just had a major mark-to-market event, in effect,” Kedrosky wrotes. “As more than a few people have argued to me via email, if most of the industry had to mark their ABS books to 27 cents on the dollar, the U.S. banking business would be in deep, deep trouble.”
So far the reaction from Wall Street has been mostly marked by silence, prompting one veteran Wall Streeter to remark over drinks last night, “How can you tell when a Wall Street bank is lying about the condition of its credit portfolio? It’s when they aren’t making any noise at all.”
E-Trade: Citadel Investment Analysis, Part 2 [Infectious Greed]
China Bends To U.S. On Trade Subsidies (Forbes)
We doubt this will have much effect on anything, but China has agreed to pare back certain export subsidies, per an agreement signed with the US on Thursday. Supposedly, the agreement helps put China more in line with WTO regs, but it’s hard to imagine the country doing much that would lead to a big difference. And since when does the US have any credibility on subsidies?
Oil Falls Below $90 in New York for the First Time This Month (Bloomberg)
As we guessed yesterday, that pipeline explosion (and yes, we’re sensitive about the fact that two people died) didn’t prove to have much in the way of legs. Forget the century mark, now oil has to be gunning for the $90 mark. Next stop: $30. Wonder if that HuffPo blogger is going to admit that he was taken by the news hype and renounce his call for tapping of the SPR.
Verizon switches standards gears for next-generation network (CNET)
Verizon has announced the technology it will use for its “4G” wireless system, and the mobile cognoscenti seem to think this is a bigger deal than the company’s earlier “open” announcement. While the first announcement basically stated that the company would adopt something similar to AT&T, its effect could be seen as muted, since the company’s CDMA network isn’t compatible with a lot of phones. But for its next gen, it will be using a non-CDMA standard — LTE — which will be compatible with a lot more, potentially making it that much more interoperable with other devices and networks.
The End of Hurricane Hugo? (The American)
It just clicked to us: we’re going to be reading about the ‘last days’ of Hugo Chavez for the next 35 years. Seriously, if we could remember Castro’s early days, we’d say it’s eerily reminiscent, but alas that would be misleading. Then again, maybe not. Word is that the people may actually be catching on to him down there, though we’ll believe it when we see it .