China, the largest foreign holder of United States debt, said Saturday that Washington needed to “cure its addiction to debts” and “live within its means,” just hours after the rating agency Standard & Poor’s downgraded America’s long-term debt…“The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone,” read the commentary, which was published in Chinese newspapers. [NYT]
Archive for August 2011
Off by $2 trillion? NBD. Continue reading »
$$$ S&P Downgrades US Credit Rating to AA-Plus (AP)
$$$ Italy Vows Faster Fiscal Consolidation (WSJ)
$$$ US downgrade to hit repo agreements most (Reuters)
$$$ Sex Offender Accused In Cat’s Death (Omaha) Continue reading »
Rajat Gupta continues to have a pretty good run in his insider trading case considering that he was caught on tape telling Raj Rajaratnam about Goldman board meetings 23 seconds after they occurred. Which you might think would be problematic. Yesterday the SEC dropped its administrative action against him, though it will probably re-file in federal court soon.
People having less good days include the Petersons, H. Clayton and Drew, who pled guilty to criminal insider trading in New York court today. H. Clayton was a director of Mariner Energy who told his son Drew that Apache was going to buy Mariner and that he should load up on the company’s stock. Not wanting to look obvious or anything, Drew didn’t buy in his own name, instead buying for his sister and “in the name of an investment club in which he participated with several friends.” Clever! Anyway the sister and investment club, which is called “Blind Seven LLC,” made about $150,000, which was nice for them.
Drew also had a friend whom the Justice Department refers to as “CC-2” and who just happened to run a Denver hedge fund. Let’s let the Justice Department tell us a bit about CC-2:
Continue reading »
Uncle Vik’s junior mistmakers got their numbers yesterday and are said to be “none too happy.” Continue reading »
July performance. Continue reading »
As Marc Faber prepares for war and Europe tries to figure out Italy, derivatives trade group ISDA wants you to know that one thing is safe: OTC derivatives.
This might surprise you, since they’ve been famously called “weapons of mass destruction” and since counterparty risk in the over-the-counter derivatives market has been a big motivating force behind regulatory changes. But ISDA concludes that that risk is no big deal:
The [report] shows very limited counterparty credit losses at the bank level. Since 2007, losses on OTC derivatives positions in the US banking system due to counterparty defaults have totaled less than $2.7 billion, a period that includes the failures of over 350 banks with assets of more than $600 billion, as well as the failures of firms such as Lehman Brothers, Fannie Mae and Freddie Mac.
The ISDA report includes this chart, from the Office of the Comptroller of the Currency, showing credit losses (how much U.S. banks actually lost on their derivatives counterparties not paying what they owed) and net credit exposures (credit risk as a percentage of outstanding notionals):
Losses peaked in 1Q09 and have never been more than $1bn in a quarter, even when Lehman filed. Which suggests that maybe derivatives counterparty risk really is no big deal? That’s ISDA’s claim – that, and that additional Dodd-Frank regulation of derivatives won’t help much.
Of course this report has some caveats: Continue reading »
Kasanova and his bonus bitches
Last week we discussed the concept of the Do It Yourself bonus, for those who anticipate a battle with management on comp this year. Rather than wasting your time negotiating, why not just take what you know in your plums you deserve? While successfully robbing a bank is as easy these days as scribbling on a fake beard, there are other options should you be uncomfortable with such an aggressive plan. For instance, you could put the moves on a couple of bank tellers and then watch as the identity theft-facilitating panties drop. Continue reading »
Earlier this week, a Dartmouth College undergraduate wrote an opinion piece for the student newspaper in which he recounted “vomiting in my mouth” after hearing an anecdote about Bridgewater Associates supposedly paying a girl $100 to write an essay about why she chose not to participate in their summer recruitment session. That the hedge fund would be so aggressive in its attempts to convince Dartmouth’s best and brightest to waste their potential “manipulating capital” and “perpetuating class-based systems of power and dominance” sickened him, as did the fact that, as he sees it, Dartmouth has become a “vocational school for investment bankers” and those learning the skills necessary to work at “faceless hedge funds.” A ravenous reader of The Dartmouth, alum and Bridgewater co-CEO Greg Jensen saw the op-ed and today chose to take the young man to task re “impressions,” via a letter to the editor. Continue reading »
President Barack Obama’s senior advisers are confident Treasury Secretary Timothy F. Geithner will remain in his job even though he hasn’t made his intentions public, an administration official said. Geithner met recently with Vice President Joe Biden and laid out his reasons for wanting to leave the post. Biden outlined why it was vital that Geithner remain, said the official, who spoke on condition of anonymity because no announcement has been made. [Bloomberg, earlier]
Job Creation Inches Higher; Unemployment Slips To 9.1 Percent (AP)
The Labor Department says employers added 117,000 jobs last month. That’s an improvement from the past two months…Still, the economy needs twice as many net jobs per month to rapidly reduce unemployment. The rate has topped 9 percent in every month except two since the recession officially ended in June 2009.
RBS Slides to Loss as Greek Writedown Adds to Burden of Insurance Redress (Bloomberg)
“Greece was the only significant sovereign exposure that we had inherited from ABN Amro among the countries first in the firing line,” said Hester, 50. “In Ireland and Portugal, the other two, although we have commercial positions inside those countries, our sovereign debt position is negligible.” RBS’s first-half net loss compared with a profit of 9 million pounds in the year-earlier-period and analyst estimates of a 571 million-pound loss, according to the median estimate of five surveyed by Bloomberg. The loss widened to 897 million pounds in the second quarter from a 528 million-pound loss in the first three months of the year.
Merkel, Sarkozy to Discuss Euro-Zone Situation (WSJ)
German Chancellor Angela Merkel will talk Friday to French President Nicolas Sarkozy over the telephone, with the “current situation in the euro zone” among the issues to be discussed, a Merkel spokesman said Friday. The spokesman had no further information, but the office of the French presidency confirmed the conversation will take place Friday afternoon. On Friday expectations surrounding the Merkel-Sarkozy talk were high. “Given the tornado that’s hitting markets, it would be judicious for policy makers to send a strong signal and bring a bit of calm and reason to investors who have lost their compass,” Fabrice Couste, head of CMC Markets France, said.
Marc Faber: Brace For A ‘Global Reboot’ And A War (CNBC)
“You have a computer. Occasionally the computer will crash and you have to reboot it. That will happen to the global economy. Before this happens there will be much more money printing because basically the central banks are willing to do that,” he said. “By printing money, problems are not solved, but they can be postponed, and they become larger. It’s like the recession in 2001. Had there not been massive money printing, it would have been steeper than what we had, but equally, we would have avoided probably the financial crash in 2008…The next time we have a global economic crisis, it will be much worse than 2008. Before this happens there will be money printing and there will be war. The whole system will collapse,” he said. “That’s why I’m advising people that they have to think it through. In a total collapse you don’t want to own government bonds and cash.”
Asian Leaders Vow To Respond If Needed (WSJ)
Asia-Pacific policy makers Friday voiced concern about the darkening of the global outlook and declared themselves ready to respond, potentially complicating the fight against inflation that many in the fast-growing region are waging.
Rent Is Too Damn High Candidate Facing Eviction From Rent Controlled Apartment (NYP)
Jimmy McMillan says he pays $872.96 for a rent-controlled ground-floor apartment on St. Marks Place in the East Village — which he’s had since the late-1970s, when the rent was around $275. But the man who founded the tenants-rights party says his landlords are giving him the boot so they can pull in way more dough. “I’ve been here since 1977, and they want more money!” McMillan says. “It’s about ‘My Rent is Too Damn Low.’ ” Continue reading »
