Partygoers Alarm Zurich Officials, Who Say Revelry Isn’t Swiss

“Spontaneous revelry and drunkenness are shocking to the Swiss, who value orderliness. Armies of street sweepers clean up cities daily, garbage police inspect household refuse, and 95.9 percent of the trains run on time.”

Zurich is the most uptight place we’ve ever lived — I could tell a hundred stories, but won’t. (I do miss the trails and beautiful trail maps).

I really enjoyed the movie, Michael Clayton, despite its absurd corporate-murder-conspiracy story. Here are some favorite bits of dialogue:

Clayton explains things to an obnoxious, rich client involved in a hit-and-run:

“There’s no play here. There’s no angle. There’s no champagne room. I’m not a miracle worker, I’m a janitor. The math on this is simple. The smaller the mess, the easier it is for me to clean up.”

An intermediary from the mob and Clayton talk about the urgency of repaying a loan:

Loan shark rep: “Are you back at the tables?”
Clayton: “Like I need that kind of action. I don’t have enough going on. I hope you’re kidding.”
Loan shark rep: “If he finds out you’re playing cards with his money, there’s no dialogue after that. Do everyone a favor. Get out the treasure map and start digging. You’ve got a week.”

Marty Bach, head of the law firm, on the (de)merits of the uNorth case (the late Sydney Pollack always played a good Jewish gangster, er lawyer):

“This is news? This case reeked from day one. 15 years in and I gotta tell you how we pay the rent? … Hey, when did you get so fuckin’ delicate?”

I recommend seeing the movie if you haven’t already.

Asia Is About to Give U.S. a Kick in the Fannie

“China holds $376 billion of long-term U.S. agency debt and, according to James McCormack, head of Asian sovereign ratings at Fitch in Hong Kong, most of it is in Fannie and Freddie assets. Fannie and Freddie aren’t just too big to fail — they’re too geopolitical to fail … Asia has few alternatives [for investment]. The magnitude of the region’s trade surpluses leaves few options other than parking money in the most liquid securities and keeping currencies from rising into uncompetitive territory.”

In order to please our foreign creditors (who generously provide $2 billion a day), we need to make the implicit guarantee of agency debt explicit (windfall gains for them!), wipe out the equityholders, and put the American taxpayer on the hook… that should do the trick. We can’t afford to stick our moneylenders; they hold the mortgage, right?

Citigroup Limits Meetings, Pares Color Photocopies

“Citigroup is clamping down on spending after reporting $55 billion of writedowns and credit losses in the past year, more than any other bank … Color photocopiers will be removed from some locations and their use will be limited to client presentations … Citigroup employs about 363,000 people globally … ‘We will be conducting a review of our Blackberry usage. In the interim, all new Blackberries will require pre-approval.’”

What a riot. How many Vice Presidents does Citigroup have left on the payroll who make six figure salaries and screw around all day on the internet like the late, lamented Large? My conservative guess is at least 10,000.

U.S. Stocks Drop, Led by Financial Shares, AIG, Banks Retreat

“AIG tumbled to a 13-year low after Credit Suisse Group said the insurer may lose $2.41 billion this quarter on mortgage- related writedowns … Columbian Bank & Trust Co. became the ninth U.S. bank to collapse this year … About 865 million shares changed hands on the New York Stock Exchange, the slowest trading day of the year … All 10 industry groups in the S&P 500 dropped … The KBW Bank Index tumbled 3.4 percent as all 24 of its companies decreased … Lehman Brothers Holdings Inc. slipped 6.6 percent to $13.45 on concern that a Korean bank will abandon a potential investment in the fourth-largest U.S. securities firm.”

Here’s a chart of various debt ratios for AIG. I tried to get some long-term numbers (specifically debt-to-common equity) for brokers like Merrill and Lehman, but Bloomberg doesn’t have much data. I need to find one of those old guys who has saved 40 years worth of Value Line’s in his basement.

Related: AIG Shareholders in AIGony

We went to an Athletics event last night at the Olympics and sat in the second row. Here are a few pictures I snapped:

Commodities Rally, Head for Biggest Weekly Advance Since 1975

Another article with dumb, lame, or nonsensical reasons given for price movement that’s probably all technically driven.

The last time I posted this chart was at the end of April. Gold is connected to the dollar which is connected to the resolution of the credit crisis… it’s all interwoven, seemingly simple but really complex. As Ed Seykota is fond of saying: trading is the toughest way to make an easy buck.

Profile of Merrill Lynch’s CDO team from May 2005 [emphasis mine]:

“Is there a danger that the market is so opaque that even those who invest in it are taking bigger risks than they should? Nomura’s Whetten says some investors who have entered the market recently might be getting in over their heads. ‘The people who jump into the market last tend to be the ones with the least knowledge,’ she says. ‘People who invested and got hit in 2001 and 2002 said, ‘we just didn’t know what we were buying.’ It’s possible that something on a smaller scale [ed. or a much larger scale] could happen because everyone is buying CDOs with a me-too attitude.’ She adds that many investors with little understanding of structured finance have simply, and dangerously, applied their knowledge of corporate bonds to asset-backed securities … For now, it seems, investors are more interested in returns than transparency or simplicity.”

Investors desperate for yield, blinded by greed, lazy, imprudent, irresponsible… the usual mix. I don’t blame these guys who issued the stuff. Caveat emptor!

Let me remind you what Vanguard’s position was [emphasis mine]:

“Vanguard Group Inc., the second-largest mutual fund company in the U.S., has a policy of never buying CDO commercial paper for its $90 billion in money market funds or $325 billion in fixed-income mutual funds.

‘It really gets down to transparency questions,’ says John Hollyer, risk management director at Valley Forge, Pennsylvania-based Vanguard. ‘Can you understand what you have? And can you measure it appropriately? We haven’t been comfortable that we could.’”

via s_m_i (Twitter)

Fannie, Freddie Shares Slump, Bonds Rise on Bailout Speculation:

“Fannie and Freddie have $223 billion of bonds due by the end of the quarter and their success in rolling over that debt may determine whether they can avoid a federal bailout. Fannie has about $120 billion of debt maturing through Sept. 30, while Freddie has $103 billion … Freddie yesterday sold $3 billion of five-year reference notes at its highest yields over benchmarks in at least 10 years as demand fell from Asian investors and central banks. The debt priced to yield 4.172 percent, or 113 basis points more than U.S. Treasuries of similar maturity. The company sold five-year notes in May at a spread of 69 basis points.”

There was a nice spot for Dummies to short Fannie yesterday, assuming you could find shares.

Blast from the past, (November 6, 2003):

“‘These institutions are so large and so important to the housing financial system that we can’t afford to let them melt down,’ Wayne Abernathy said … Investors have already been demanding interest of 55 basis points above U.S. Treasuries to own Fannie Mae’s 10-year notes, up from 37 in June [2003].”

Related: All posts mentioning Fannie