Archive - Mar 24, 2009 - Story

Following up on Tyler's earlier post, it's important to put the potential PPIP assets in perspective to the overall holdings of the banks.

Following up on Tyler's earlier post, it's important to put the potential PPIP assets in perspective to the overall holdings of the banks.

The Treasury's arbitrary transaction price of 84 for the "pool of residential mortgages" seems to not have been all that arbitrary after all. In fact, as it may turn out, it was gloriously optimistic. A report by Goldman today on the PPIP caught my eye, with one chart in particular, indicating that bank are still marking the bulk of their "assets" at 90-95! Of particular note is Citi's delirious optimism on marks in its assorted asset classes, especially commercial mortgages.

The Treasury's arbitrary transaction price of 84 for the "pool of residential mortgages" seems to not have been all that arbitrary after all. In fact, as it may turn out, it was gloriously optimistic. A report by Goldman today on the PPIP caught my eye, with one chart in particular, indicating that bank are still marking the bulk of their "assets" at 90-95! Of particular note is Citi's delirious optimism on marks in its assorted asset classes, especially commercial mortgages.

This morning's numbers came in slightly above the consensus projections and the Euro responded by essentially doing nothing. At least part of the lack of reaction is due to this.

In anticipation of the new biannual IMF report due out early April, I present the most recent Global Financial Stability Report which was issued in October 2008. If nothing else, it has some nice charts and at 246 pages, makes for a good paperweight.

Porsche may be in technical default by midnight. Granted the chances are slim but it would be a fitting conclusion to Volkswagen squeeze saga. The company has a €10 billion loan refinancing due by midnight and is currently scrambling to find last minute cash to complete the deal. Market sources say the automaker has only managed to obtain €8.55 billion in commitments from banks and is facing a €1.45 shortfall. Unless banks cough up the balance, Porsche will be forced to fund the difference out of its own cash.

Gang, over the next week I will be travelling and unable to post as frequently, although we do live in interesting times so will occasionally try to make my way back. In the meantime I leave you in the capable hands of Cornelius. In my absence, if bored I recommend you read back some of the posts you may have missed, many of which are conceptual in nature.

Glenview steps up to the Citi, BofA, JPM etc. plate and announces it also has "begun the year in a profitable fashion." Too bad there is no public stock to generate a short squeeze.

Larry, Bottom Line it For Me

We recognize that many of you, while you appreciate the completeness of the disclosure, just want the punch line.
Here it is:

1. We believe the majority of our losses will be recouped in the same securities we lost money in, as those securities rebound towards fair value.

Iconic fashion house BCBG Max Azria is setting off on a last ditch effort to avoid bankruptcy. As I wrote last, the company has a $20 million March loan payment due which it will find next to impossible to make.

• Geithner's trillion dollar gamble (Eurointelligence)
• AIG furor helped funds in Geithner's toxic plan (Reuters)
• U.S.
  

The one-two knockout punch from last week's quantitative easing by the Fed and today's massive implicit toxic asset offloading guarantee by the Treasury served a bitter dish to market doomsayers. Putting the fact aside that the two actions are essentially contradictory (30 years collapsed Monday after the ripfest last week), much was said today, and over the weekend, about Geithner's plan to present hedge funds with a once in a lifetime opportunity of a 12-to-1 upside/downside investment ratio.

A bunch of critical numbers are coming out tomorrow including the German and EU purchasing manager index numbers and UK CPI and RPI indices. The US housing price index numbers are largely irrelevant after today's existing housing sales numbers and the consensus which has been priced in, is likely to be spot on.