Archive - Mar 2009 - Story

Seriously, this guy needs a muzzle. Obama's public support for his embattled SecTreas seems misplaced after Geithner publicly expressed his openness for the Chinese and Russian proposal to strip the USD of "reserve currency status". The dollar got mauled across every single currency pair before Tim was able to issue a correction that promptly caused a reversal.

For a more anecdotal view of the unemployment numbers, it's interesting to look at the recent story on IBM. The tone of the article focuses on the "bad economy, everyone's firing" meme without really digging into the details. It's pretty clear that IBM is using the current economy to shift a significant chunk of its global business services unit (everything from management consulting to IT support) to India - a labor arb play that would never fly in more normal times.

At first opportunity (but not for a few days) I will write an extended post on the cash flow dynamics of both CRE whole loans and CMBS. There seems to be too much confusion on the topic, which is at the heart of the "is the price fair/is it not fair" argument for the toxic asset bid/offer disconnect in the PPIP. Below is a good chart I tracked down which shows the most recent prices on sub-AAA CMBX tranches, and how this flows through in terms of spreads, loss rates, loss timings, average deal losses and a market-to-base case (flat loss assumption) ratio.

At first opportunity (but not for a few days) I will write an extended post on the cash flow dynamics of both CRE whole loans and CMBS. There seems to be too much confusion on the topic, which is at the heart of the "is the price fair/is it not fair" argument for the toxic asset bid/offer disconnect in the PPIP. Below is a good chart I tracked down which shows the most recent prices on sub-AAA CMBX tranches, and how this flows through in terms of spreads, loss rates, loss timings, average deal losses and a market-to-base case (flat loss assumption) ratio.

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.