Archive - Story

• Durable Goods: -5.2% vs -2.5% consensus, Jobless Claims: 667k vs 625k; Continuing: 5112k vs 5025k
• More black hole...
  

• Capmark in default, hires Lazard to restructure balance sheet (PR)
• Lyondell fails to win DIP approval, hearing to pick up Thursday morning after profuse objections (Debtwire)
• Citi to announce agreement with government on Thursday (Reuters)
• One perspective of the government's Prime Brokerage program aka TALF (

The recent spillover of the threat of an Eastern European collapse, and its gradual spread into the Eurozone, has manifested itself best in the dramatic widening of sovereign CDS. The so-called socialization of risk had resulted in a tightening of corporate and bank default risk at the expense of the respective sovereign domiciles.

All bank holding companies with assets over $100 billion will be stress tested. The test will use a baseline scenario and a worst case- longer recession one. Here is where the Fed shows its disconnect with reality yet again, as the worst case scenario is already the optimistic one for several parts of the country. Bank testing under the worst case assumes:

Rumors have swirled today that mall jewelry retailer Finlay, owner of such chains as Bailey Banks and Biddle, Carlyle and Congress, may file bankruptcy as early as tomorrow, and the only thing preventing it from filing is the hope that its vendors, who are owed $25 million, will agree to receive that money in delayed installments over the next 180 days. The vendor negotiations were first presented in a report circulated by Israeli Diamond Industry.

Not wanting to be left as the only stock in the world distributing its lack of retained earnings to shareholders, and following in the footsteps of such heavyweights as JP Morgan and competitor New York Times, Gannett, which was last seen trying to raise the price of its USA Today paper to parity with Amazon's Kindle, has had enough pampering those ungrateful shareholders who only short it anyway, and cancelled its dividend. Whether this extends the life of its business is questionable - CDS was last trading at an even 1000 bps, roughly where US Sovereign CDS will be trading in about a month.

Swiss regulator Commission de Surveillance du Secteur Financier ordered UBS to review internal controls at its Luxembourg unit and report within three months, criticizing the bank of a "grave breach" of oversight as custodian bank for Luxembourg based funds linked to Bernard Madoff. The CSSF issued a statement that is even more applicable to every fund of funds in the U.S.

In an interview on Bloomberg TV, Lewis claims the bank will make over $100 billion in revenue in 2009. Ken Lewis And Obama Should Run Telethons. BofA's grand inquisitor has had about 30 media appearances over the past week in which he has repeatedly claimed that nothing is f@*#&d here. Kinda like the president.

***Update from Interview****

1. Will sell "non-strategic assets" from Merrill acquisition (maybe should not have bought them in first place)
2. "Feels good" Bank of Countrywide Lynch will pass stress test (the market feels bad)

Just out courtesy of Timmmmay. Relevant items highlighted

Terms:

Aka Bob's World... Bob is Chief Credit Strategist at RBS and has been right about everything we are experiencing long before Taleb and Roubini. The attached reading is a must-read for anyone who (mis) manages assets and definitely for our elected officials. Better than any hedge fund letter any day of the week.

Bob's World - Free Legal Forms

Lyondell CFO Alan Bigman testified in bankruptcy court today, pleading with the judge to get approval of the bankrupt company's request for an $8 billion DIP (the largest in history and yielding a 20% interest rate to some of the lenders), as without it the chemical company may very well go straight to liquidation. Objecting parties to the Debtor In Possession loan are of course unsecured creditors and bondholders, which would be crammed down even more, thereby virtually guaranteeing no recoveries for them as a result of a successful Chapter 11.

The exodus continues as things smell fishy in the house of Lasry: first Chelsea, now Bruce Grossman, formerly head of U.S. distressed-debt strategy at Avenue, and whose book was $7.7 billion out of Avenue's total $17.2 billion in November (now both likely a tad lower).

Ken Moelis is an unstoppable force. The legendary former head of IB at UBS, who started Moelis & Co. in 2007 has been on an unprecedented hiring spree. And seeing how he is one of the very few banks not printing red, he has been able to pick the top talent left and right.

After Boaz Weinstein blew the place up, others are refusing to pick up the shrapnel. Bberg reports that DB's entire quant trading group, Equitech, has left to start on its own. The new fund will be called Roc Capital Management, based in NY and will be run by Arvind Raghunathan. Nicola Ralston, an advisor on investing in hedge funds points out the blatantly obvious "In this environment, it’s particularly important for individuals to have reputations in order to get access to seed money."

Anti-bailout Spartacus Rick Santelli reporting something our readers knew on Friday of last week, namely that US CDS has now passed 100 bps. Granted, on Friday the bid was 95, and has since moved wider to past 100, implying the mid is around 105. US CDS has in fact blown out wider than Japan, Germany and France, meaning the market perceives the US sovereign risk as greater than all of these countries.