Banks/Bond Holder Haircut?
 

[QUOTE=Fusion_power;273220]
Across the pond, acknowledgement is finally being made that the systemic problems in Greece are far greater than Greece cares to admit. 8 billion more euros in October,

<snip>

DarJones[/QUOTE]

Here, we are still over-leveraged. The Huffington Post has an essay suggesting that debt-relief by banks (and their bond holders) is a solution.
I don't buy it:

[url]http://www.huffingtonpost.com/2011/10/03/debt-relief-haircut-economists_n_991909.html?1317645340&icid=maing-grid7%7Cmain5%7Cdl16%7Csec3_lnk2%7C100956[/url]


The best thing to do about unemployment is to provoke the DECISION
MAKERS. Make it in the personal best interest of senior management to
stop the layoffs and start hiring. Congress could start by insisting that
any layoffs in a public company over (say) the next 2-3 years be done
FROM THE TOP DOWN. Senior management claims they deserve their
high salaries/perks/benefits/stock grants/bonuses because it is their
job to see that their company does well. If layoffs are needed, it is a strong
indication that they HAVE NOT DONE THEIR JOBS. They should bear the
burden of the layoffs. Similarly, we should require that U.S. companies
hire one U.S. worker for every overseas worker that they hire. Or
(even better IMO) place a very strong limit on compensation in U.S.
companies until they do hire.

Let's get people back to work.

There are no rogue traders, there are only rogue banks
 

Barry Ritholtz has a nice commentary on the latest "rogue trader" incident (this one at UBS) in a recent Sunday edition of the Washington Post:

[url=http://www.ritholtz.com/blog/2011/10/there-are-no-rogue-traders-there-are-only-rogue-banks/]There are no rogue traders, there are only rogue banks[/url]


[b]California breaks from 50-state probe into mortgage lenders[/b]

[url=http://latimesblogs.latimes.com/money_co/2011/09/california-atty-gen-kamala-harris-breaks-from-national-foreclosure-probe.html]California breaks from 50-state probe into mortgage lenders[/url]
[quote]California Atty. Gen. Kamala Harris will no longer take part in a national foreclosure probe of some of the nation's biggest banks, which are accused of pervasive misconduct in dealing with troubled homeowners.

Harris removed herself from talks by a coalition of state attorneys general and federal agencies investigating abusive foreclosure practices because the nation's five largest mortgage servicers were not offering California homeowners relief commensurate to what people in the state had suffered, Harris told The Times on Friday.

The big banks were also demanding to be granted overly broad immunity from legal claims that could potentially derail further investigations into Wall Street's role in the mortgage meltdown, Harris said.
...
The removal of California from the discussions is a major blow to fraying efforts by the coalition, which has been trying to strike a settlement deal with the big banks for months. The move by Harris to reject the settlement talks is also a key departure from efforts by the Obama administration, which has been pushing for a fast resolution to the so-called robo-signing scandal that erupted last year.

“This whole concept of a settlement on foreclosure abuse is probably dead,” said Christopher Whalen, the founder of Institutional Risk Analytics. “Nobody in their right mind is going to opt into a settlement right now.”

For California homeowners, the move means the probable end of an opportunity for relatively quick relief stemming from revelations last year that banks improperly foreclosed on troubled borrowers. Key reforms to mortgage-servicing and foreclosure practices pushed by the attorneys general may also be delayed.

Harris has faced increasing pressure in recent weeks from inside and outside the state to reject any deal that was considered too weak, particularly as the foreclosure crisis in the Golden State appears to be worsening.

Among the states with the highest foreclosure rates, California led the pack in new foreclosure proceedings last month, with an increase of 55% over July, according to data from Irvine-based RealtyTrac. Metro areas in the inland parts of California posted big jumps in August, with Riverside and San Bernardino counties soaring 68%, Bakersfield 44% and Modesto 57%.

In rejecting the 50-state talks, California also widens the riff [sic] among law enforcement officials nationwide over the best approach to pursuing banks for mortgage misdeeds.

New York Atty. Gen. Eric Schneiderman, who was originally part of the 50-state negotiations, has launched a wide-ranging investigation into Wall Street's role in the mortgage meltdown - focusing on the efforts to bundle low-quality mortgages into sophisticated bonds.

Schneiderman has been highly critical of the proposed 50-state settlement and expressed concern that his counterparts in other states may let the banks off too lightly and provide immunity from other efforts to bring them to account for misdeeds. Schneiderman has also won support from attorneys general in Delaware, Nevada, Massachusetts, Kentucky and Minnesota, some of whom have launched their own investigations.

A spokesman for Schneiderman, Danny Kanner, welcomed Harris's move.

“Attorney General Schneiderman looks forward to his continued work with Attorney General Harris and his other state and federal counterparts to ensure those responsible for the mortgage crisis are held accountable and homeowners who are suffering receive meaningful relief,” said Kanner.[/quote]
[i]My Comment:[/i] Another red-letter day for many of the biggest TBTF banks again today:

Citigroup -9.8%
BofA -9.6%
Credit Suisse -7.7%
Morgan Stanley -7.7%,
UBS -7.6%
Royal Bank of Scotland -6.6%
Deutsche Bank -5.1%
JPMorgan Chase -4.9%
Goldman sachs -4.7%
BNP Paribas -4.6%
Wells Fargo -3.9%

Did I miss any major TBTF movers? I have only a tiny position in FAZ (3X inverse-leveraged ETF which shorts the Russell 1000 Financial Services Index, and which is +13.3% today) but used last week`s early-week mini-rally to reestablish some targeted shorts (none in the financials, as it happens), closed most of those out last Friday for a nice gain, letting a small one continue to to ride. Of course I missed the trade-of-a-lifetime Big Short of the year so far, which is the collapse of Netflix shares, partly because I decided to heed the advice of a friend who said he knew that NFLX had all "these exclusive deals with Hollywood studios for content" in their pipeline, and partly because market reaction to the company`s major subscription prie-hike a few months back was mostly neutral - until Netflix released the next batch of subscriber-number data, which are a closely guarded secret until released. Ah well, live and learn - and I did still make a decent chunk of change off shorting NFLX, just not the 50-100x jackpot trade that might have been. Rest assured, there will be others.

I couldn't resist....:smile:
[QUOTE]
Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous
[/QUOTE]

I am somewhat confused by the speech that my country's Chancellor gave today, in which he said that the UK Government was prepared to buy the corporate bonds of small and medium companies. I would have said that issuing corporate bonds was pretty much the definition of a large company.

[QUOTE=xilman;273142]From [url]http://www.angelfire.com/or/truthfinder/wisequote.html[/url]

And note that it's "von Bismarck". I'm surprised a German speaker would make that typo ...[/QUOTE]

I admit my personal convention of capitalizing "Von" when this kind of "of" surname is used sans first name makes me a bit of an oddball. But I have my reasons for doing so:

1. Although born in German-speaking Europe, I have spent over 80% of my life in the U.S., hence many conventions that seem "perfectly normal" to lifelong German speakers strike me as odd. One example of this is the German national silliness of saying 2-digit numbers in last-digit-first fashion. That is not only bizarre (goes against order of digit significance) but also error-prone and inefficient because it means that when trasncribing numbers - and Germans like to break long digit strings into pairs, so the problem gets magnified in that context - one must mentally or in writing "buffer" the input, in case the latest digit turns out to be the trailing one of a pair. Saying 83 as "Achtzig drei" will sound wacky to the German ear, but if (say) I'm in a life-or-death situation where one person is trying to communicate a crucial 2-digit datum (say distance from a known reference point of a party needing rescuing) to another over an interrupt-prone channel and only manages to get in one digit before the line gets interrupted, would those on the receiving end be better served by getting the "achtzig" or the "drei und"?

2. In tbe case of "von" vs "Von", it's fine to use lowercase in the context of the full name ("Werner von Braun") but seems weird to me to do when just the last name-pair is used, because e.g. in reading "...da kam in unsere Richtung von...", using the lowercase convention the next word could be a name ("...von Braun") or, say, a direction ("...von der Strasse"). Again this leads to the need for mental buffering of the input, whereas if one use the "Von" convention, it`s obvious that a name is involved.

3. In the recent "science news" discussion about particle/wave duality, I saw a lot of references to "De Broglie" (with or withough the space), and no one seemed bothered by that. I`m just being consistent in my usage of "of" surnames.

[QUOTE=fivemack;273334]I am somewhat confused by the speech that my country's Chancellor gave today, in which he said that the UK Government was prepared to buy the corporate bonds of small and medium companies. I would have said that issuing corporate bonds was pretty much the definition of a large company.[/QUOTE]

Would that be Von Bismarck or someone else? :)

[QUOTE=ewmayer;273413]
1. Although born in German-speaking Europe, I have spent over 80% of my life in the U.S., hence many conventions that seem "perfectly normal" to lifelong German speakers strike me as odd. One example of this is the German national silliness of saying 2-digit numbers in last-digit-first fashion. That is not only bizarre (goes against order of digit significance) but also error-prone and inefficient because it means that when trasncribing numbers - and Germans like to break long digit strings into pairs, so the problem gets magnified in that context - one must mentally or in writing "buffer" the input, in case the latest digit turns out to be the trailing one of a pair. Saying 83 as "Achtzig drei" will sound wacky to the German ear, but if (say) I'm in a life-or-death situation where one person is trying to communicate a crucial 2-digit datum (say distance from a known reference point of a party needing rescuing) to another over an interrupt-prone channel and only manages to get in one digit before the line gets interrupted, would those on the receiving end be better served by getting the "achtzig" or the "drei und"?[/quote]I agree completely.

Personally, I'd say "acht drei" but then again in English I'd say "eight three" in such life-or-death circumstances. I'd also use the international standard alphabet Alpha, Bravo, Charlie, Delta, Echo. Foxtrot, ...

In a previous life I was head-honcho for a CERT (OxCERT to be precise) where I learned to specify dates as, for instance, 2011 October 4th rather than any local convention such as 10-4-2011 or 4-10-2011 which are intrinsically ambiguous to an international audience. Likewise, I'd always specify the time as 17:22:39 UTC rather than 6:22 pm (which is what it is here at the moment) or 12:22 EST (because both the US and Australia, at least, have a timezone named "EST") even if the event in question had US timestamps (though as a convenience to the reader I'd say "17:22:39 UTC == 13:22:29 EDT in the US).

The US middle-endian style for specifying dates seems to me to be bizarre but then I'm a European and prefer strictly big-endian or little-endian representations.

I also try to use "de Broglie" (and "ffrench" for an English example) but confess that I sometimes fail to live up to my standards.

OK, so I'm a pedant. I can live with that.

Paul

[b]Economic Bust Hits Australia[/b]

[url=http://globaleconomicanalysis.blogspot.com/2011/10/australia-central-bank-signals-rate-cut.html]Economic Bust Hits Australia[/url]


[b]Belgium's Largest Lender About to Become First Casualty of Greek Default[/b]

[url=http://globaleconomicanalysis.blogspot.com/2011/10/dexia-belgiums-largest-lender-about-to.html]Dexia, Belgium's Largest Lender About to Become First Casualty of Greek Default; Emergency Meeting to Split Bank Now in Progress[/url]
[quote]In recent (and totally useless) "stress-free" tests, Dexia passed with flying colors. Dexia passed those tests only because the tests did not include any writedowns of Greek debt. Tonight, an emergency board meeting is underway because Dexia is massively undercapitalized as a result of its Greek bond position.

Please consider [url=http://www.businessweek.com/news/2011-10-03/dexia-board-said-to-meet-as-sovereign-debt-crisis-curbs-funding.html]Dexia Board Said to Meet as Sovereign Debt Crisis Curbs Funding[/url]
[i]...
“Dexia is an extremely complicated file,” said Benoit Petrarque, an Amsterdam-based analyst at Kepler Capital Markets with a “hold” rating on the shares. “The fact that two countries are involved, both under pressure from rating agencies, makes it even more difficult. [u]We are not in 2008 anymore, when you could just inject multibillions of cash[/u].”
In September 2008, France and Belgium led the first rescue of Dexia, buying a combined 3 billion euros of stock. The bank’s existing shareholders, which include Caisse des Depots et Consignations and Belgium’s Holding Communal SA, provided an additional 3 billion euros.

Less than a month later, Dexia also obtained as much as 150 billion euros of debt guarantees from France, Belgium and Luxembourg, of which it tapped a maximum of about 96 billion euros in May 2009. The bank stopped issuing government-backed debt in June 2010. It still had 29 billion euros outstanding at the end of last month.[/i]

Euronews provides additional details in [url=http://www.euronews.net/2011/10/03/dexia-dragged-down-by-greek-debt-worries/]Dexia dragged down by Greek debt worries[/url]

[i][u]The French and Belgian government will do the right thing to support bank Dexia in the current turbulent markets[/u]. So said the Belgian Finance Minister Didier Reynders.

It is now looking more likely that Dexia’s state shareholders will have to consider a second bailout of taxpayers’ money.

Dexia is not the only European bank facing a need for capital as regulations become tougher, profits sag and lenders face losses on sovereign bonds if the euro zone crisis isn’t resolved.

Banks face a 148 billion euro capital shortfall under a base case and a 227 billion shortfall under a stressed scenario, according to analysts at JPMorgan, who say Unicredit , Deutsche Bank, Lloyds, Societe Generale and Barclays each face a deficit of over seven billion euros under its stressed scenario.[/i][/quote]
[i]My Comment:[/i] Contrast the "you must bail us out" stance of the Belgian Finance Minister against the "We are not in 2008 anymore" attitude of the Amsterdam analyst.

Also note the numbers: The "worst-case" scenario described by the JPMorgan analysts is a little over 200 billion Euros for *all* the bamks - But Dexia alone needed a lifeline of similar size back in 2008.

[b]Late Afternoon Market Boner Alert[/b]

Reader caption contest for this one: Provide a suitable rational-market-commentary-sounding caption-conclusion to accompany the following DJIA daily chart:

"After being in red for nearly the entire session, U.S. equity market staged a dramatic late-day comeback on news that __________________"

[QUOTE=ewmayer;273432]
"After being in red for nearly the entire session, U.S. equity market staged a dramatic late-day comeback on news that __________________"[/QUOTE]... any further drop would satisfy the formal definition of a bear market.

[QUOTE=ewmayer;273432][B]Late Afternoon Market Boner Alert[/B]

Reader caption contest for this one: Provide a suitable rational-market-commentary-sounding caption-conclusion to accompany the following DJIA daily chart:

"After being in red for nearly the entire session, U.S. equity market staged a dramatic late-day comeback on news that __________________"[/QUOTE]

A new bailout package was announced for Dexia.....:no:

[QUOTE=ewmayer;273432][b]Late Afternoon Market Boner Alert[/b]

Reader caption contest for this one: Provide a suitable rational-market-commentary-sounding caption-conclusion to accompany the following DJIA daily chart:

"After being in red for nearly the entire session, U.S. equity market staged a dramatic late-day comeback on news that __________________"[/QUOTE]

Greece has not yet defaulted.



Would anyone care to start a betting pool? "At what level will the DOW
bottom out" (or Nasdaq/S&P etc?).