Wednesday, March 19, 2008

What Larks!

Macro Man has spent most of the day bedding in, getting his technology up and running at his new job. Despite this, so far today he's seen/heard:

*Rumours that UBS is going under and needs to be rescued by Credit Suisse

*Rumours that HBOS is going under

* Rumours that Lloyds bank is going under

* Rumours that the Bank of England has cancelled all staff holidays over Easter

* A cheeky 20 handle range on the SPX

* Close to a 2 yen range in USD/JPY

As Pip from great Expectations might say, "What Larks!"

6 comments:

MP said...

Now what do you make of this headline "Fannie, Freddie Surplus Capital Requirement Is Eased"????

Go figure...

Anonymous said...

well morals man it seems they finally came around...lemme tell u that bens got a hell-uv-a-coptha

"Cassandra" said...

MM - There are some places that I personally would rather not dabble. For example, between 2004 and 2007, HBOS grew their Loans & Mortgage Book from GBP286 billion to GBP430 billion. GBP60 billion of this was provided for by "deposits" of one type or another, with the balance presumably provided by a combination of short-term and long-term debt, for The Bloat is sitting upon virtually unchanged capital of GBP22 billion, up from GBP20 billion in 2004. Now there are a couple of thought experiments one can do. You can play with the loan values, think about what UK property prices have done over the same interval, think about the typical wafer of downpayment i.e. margin, and wonder what a 20% to 30% retracement in UK home prices might do to their capital position, not to mention what other leaks might need to be plugged in the event their deposits weren't quite as sticky their unactuarial assumptions might have forecast, and presto, the Swervin Mervin is long another bank.

This a peculiarly anglo-saxon-iberian problem. Unfortunately, the time to have been thinking about this (for bankers AND regulators) was when said banks were extending credit. I haven't done the Chase Credit course, but as a student of Chilly Palmer Credit Course, after witnessing a doubling of prices from elevated levels, one [a hypothetical lender] should be asking for MORE margin and vig, not LESS, if said lender has an intention to hold the loan and with the grace of one's deity of choice, be paid-back in full without missed payments or default. Yet for some reason the OPPOSITE seems to have occured, with banks asking for LESS upfront, less vig, leaving a lower margin for error in regards to multiples of income upon which they were willing to lend.

I have less concern for the system, than I do for current equity (and preferred) owners of said institutions. For when the begging bowl is passed by mgmt, (or new owners, bet they private or public)) new equity will be on terms and conditions that will not be charitable to the existing holders.

Anonymous said...

Add: rumor that little rumors are getting bailed out by Big Rumors.

RBG said...

MM,

Looks like your job switch was well timed. From today's FT:

"...a senior executive at a London hedge fund says the postbag is crammed full of CVs. 'It just doesn't get any better than this. You can practically choose between Harvard MBAs who are Navy Seals and have an Olympic gold medal.'"

Peter said...

MM good luck in the new job..

still macro prop ?

or u in structured credit sales now..? heeheh