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Cars and financials not happy

Cars and financials not happy

In an 8-K filing sneaked late on Friday after close, the highly leveraged mall operator General Growth Proprties announced that as a result a termination on February 12 of several forbearance agreements with lenders, and being unable to enter into forbearance agreements for some other loans it is in default under several of its loans. As noted in the 8-K:

• US Government seeking $40 billion DIP Loan for GM and Chrysler (WSJ)
• The extent of Obama's bank nationalization plan (Bloomberg)
• Newspaper dominoes: Philadelphia Inquirer files for bankruptcy (FT)
• U.A.E.
  

As the futures market is gleefully unaware of just how horrible everything really is, Japanese small business lender SFCG filed for bankruptcy today. This represents the largest Japanese bankruptcy by a public company in almost 7 years. The company listed $3.6 billion in liabilities at filing, and among its creditors is none other than the latest addition to the portfolio of Taxpayer Capital LLC, Citigroup itself, which was owed 71 billion Yen.

Developing story: The Financial Times has just broken that Citigroup is pressing the U.S. government to take a 40% stake - a nationalization, but not quite... Obviously everyone would be convinced that the government stopping short of owning another 11% would be oh so critical. The fact that futures are up on this news is conclusive evidence that traders and bloomberg terminals have been supplanted by monkeys and typewriters.

As the October Volkswagen debacle demonstrated all too well, keeping a tab on crowded hedge fund positions is important to avoid six sigma type blow ups. Furthermore, as hedge funds tend to (generally) be better early indicators of overall market direction, it is useful to keep track of investing trends within the hedge fund community.

As the October Volkswagen debacle demonstrated all too well, keeping a tab on crowded hedge fund positions is important to avoid six sigma type blow ups. Furthermore, as hedge funds tend to (generally) be better early indicators of overall market direction, it is useful to keep track of investing trends within the hedge fund community.

One of the major problems with having relatively few restructuring advisors and a whole slew of newly bankrupt companies, is that sooner or later advisors will trip over their own feet as previously undisclosed conflicts of interest come to light. This is exactly what may soon force Lazard to forfeit over $16 million in revenue it had hoped to generate by advising bankrupt Tribune in its chapter 11 plight.

Recently Moody's has been trying hard to atone for its near terminal dropping the ball in misguided ratings over the past decade. One of the byproducts of an internal reevaluation of how it does business is its Speculative Grade Liquidity (SGL) rating system, which supplements the old letter-based risk system, that has for decades split debt-laden companies into Investment Grade and Junk, with assorted gradations.

A brief run down on Moody's SGL rating system:

Recently Moody's has been trying hard to atone for its near terminal dropping the ball in misguided ratings over the past decade. One of the byproducts of an internal reevaluation of how it does business is its Speculative Grade Liquidity (SGL) rating system, which supplements the old letter-based risk system, that has for decades split debt-laden companies into Investment Grade and Junk, with assorted gradations.

A brief run down on Moody's SGL rating system:

In the wake of the Madoff scandal, it is only a matter of time before the Fund of Funds industry disappears, as investor anger grows at the glaring failure of Fund of Funds' primary responsibility - due diligence. Fund of Funds are currently perceived as worthless middle men between hedge funds and investors, pocketing 1% management fees and 10% incentive fees for arguably doing no work whatsoever.

We have discussed the nature of the negative basis phenomenon at length previously, and judging by recent observations in the cash and synthetic market, it is evident that it is only a matter of time before this spread collapses dramatically, resulting in huge windfalls for accounts who establish basis positions currently ahead of a significant convergence in spreads.

We have discussed the nature of the negative basis phenomenon at length previously, and judging by recent observations in the cash and synthetic market, it is evident that it is only a matter of time before this spread collapses dramatically, resulting in huge windfalls for accounts who establish basis positions currently ahead of a significant convergence in spreads.

Number 14 for the year, and the second one for Oregon in a week, is Silver Falls Bank in Silverton, Oregon. Citizens Bank of Corvallis, Oregon will assume all the deposits of Silver Falls. The bank most recently had total assets of $131 million and total deposits of $116 million. The FDIC cost from this failure will be $50 million. The FDIC has graciously provided a phone number where investors should call before they proceed with the ritualistic Saturday morning run on the bank (1-800-760-3639).