September 21, 2007
Most Read Stories (21-Sep-2007 9:58:29)
Here are the top five most read stories on the Bloomberg in the last day with selected excerpts (and my comments, if any, in italics).
As of 21-Sep-2007 at 9:58:29 (Beijing time):
- Goldman Net Tops Estimates; Bear’s Drops 61 Percent
- Bear Stearns Net Drops Most in Decade on Credit Rout
- Deutsche Bank’s `Mistakes’ Will Curb Profit, Hiring
- JPMorgan, ING Funds Backfire With Long-Short Strategy
- TCW CDOs Dump $3.2 Billion of Mortgage Securities
“… Goldman profited from short positions that anticipated declining loan values. They made money in part by entering into contracts tied to ABX indexes, which reflect the perceived risk of mortgage defaults. The gains more than offset losses from writedowns on Goldman’s inventory of non-prime home loans and related securities.”
“The failure of two Bear Stearns hedge funds, which bet on mortgage securities, saddled the firm with $200 million of losses … Bear Stearns wrote down the value of mortgage assets and leveraged loan commitments by $700 million, after using financial-market hedges to mitigate the loss.”
“‘We are now correcting values of all these loan commitments for the next nine months,’ CEO Josef Ackermann said. ‘This is very conservative but right.’”
“Long-short funds charge fees of $22, or 2.2 percent, for every $1,000 invested, compared with 1.5 percent for actively managed long-only mutual funds. Managers say the higher fees are needed because shorting strategies carry higher trading costs and require more research.”
Managers say the higher fees are needed because the Maserati Quattroporte costs $110,600 and most retail investors don’t understand the effects of compounding anyway.
“‘Westways X did not experience any delinquencies or credit performance issues, but did experience widening spreads consistent with all non-Treasury fixed income sectors,’ TCW said in the statement. ‘The resulting pricing declines, while modest by most financial market standards, have been sufficient to cause the structure’s net asset value to fall below a critical threshold.’”