September 2, 2008
The Week That Was (Ending August 29, 2008)
Here are the most read stories on the Bloomberg last week with selected excerpts (and my comments, if any, in italics).
- Libor Signals Credit Seizing as Banks Balk at Lending
- Merrill, Wachovia Hit With Record Refinancing Bill
- U.S. Stocks Drop, Led by Financial Shares, AIG, Banks Retreat
- Fannie, Freddie Mortgage Profit Rises With Debt Costs
- Citigroup Limits Meetings, Pares Color Photocopies
- Lehman Said to Be Eliminating as Many as 1,000 Jobs
- Pimco Seeks as Much as $5 Billion for Distressed Debt
- Business Jet Crashes Expose Rule-Breaking Brokers
- Dubai M&A Oasis Lures London Bankers With Bigger Desert Bonuses
- Citadel Investment Seeks $1 Billion for Global Macro Hedge Fund
“The premium banks charge for lending short-term cash may approach the record levels set last year … Banks are charging each other a premium of about 78 basis points over what traders predict the Federal Reserve’s daily effective federal funds rate will average over the next three months to lend cash. The spread is up from about 24 basis points in January, and may widen to 85 basis points, or 0.85 percentage point, by mid-December, prices in the forwards market show.”
“Investors on average demand yields of 4.14 percentage points more than what they can get on Treasuries to purchase bank bonds, up from the low last year of 0.76 percentage point in January … Spreads on investment- grade rated bonds overall average about 3.14 percentage points … Banks sold $960.8 billion of so-called floaters between 2005 and 2007…. About $260 billion, or about 30 percent, of the debt coming due in the remainder of this year is floating-rate notes.”
“Fannie and Freddie … borrowing costs rose amid concern they don’t have enough capital to weather the biggest housing downturn since the Great Depression. The companies had $14.9 billion of losses in the past four quarters as late payments on mortgages rose to the highest on record.”
Zero shareholders’ equity.
“Lehman has shrunk its payroll by about 6,400, or 22 percent, in the past 12 months … Lehman, the No. 1 underwriter of mortgage-backed securities last year, was saddled with the stakes after investor demand for them dried up.”
Interested to know when the euphemism “headcount reduction” was first used.
“The new Pimco fund, dubbed Disco, will focus on commercial loans as well as residential debt that doesn’t carry explicit government guarantees or the implied backing of securities issued by companies such as Fannie Mae or Freddie Mac.”
3,500-word magazine? piece. Type of story the WSJ used to do pre-Murdoch, which is now the exclusive preserve of Bloomberg.
“Fees earned by securities firms in the Middle East rose 5 percent to $612 million in the first half of the year, the only part of the world to show growth … While it accounts for less than 2 percent of global investment banking fees, the region accounts for twice as big a share of the pie as it did a year ago.”
I can think of few more awful places to live than Dubai.
“Macro funds, which attempt to profit from broad economic trends by trading stocks, bonds, currencies and commodities, gained an average of 3.7 percent this year through July … Funds raised $29 billion of new cash in the first half, compared with $118 billion in the same period last year…. The industry manages about $1.9 trillion. ”
Hedge funds are a much more respectable corner of the world’s largest skimming operation.
September 3rd, 2008 at 10:08 am
“I can think of few more awful places to live than Dubai.”
Agreed.
Call me a romantic, but when I visit the middle east, I expect to see souks, one legged beggars, flea ridden cats, spice markets, stinking fishing boats, and wailing mullahs, not Wal Mart, casinos, and Russian whores.
I dislike the “nouveau rich”, the flash bling, the “Disney” attitude to everything. If I want to go skiing, I’ll go to the Alps and insult the French, not Dubai indoor ski centre.
September 3rd, 2008 at 10:21 am
Cap: But if you’re a pasty Englishman, suicidally depressed after suffering your third London winter, a move to Dubai may be just what the shrink ordered.
September 3rd, 2008 at 10:34 am
This is what puzzles me. The place is literally exploding with new apartment blocks and commercial construction, Europeans are ploughing billions into it, Arabs are ploughing billions into it, the whole place is being Disneyfied to make it the ulimate destination for a billion tourists.
Yet, apart from a couple of months in the winter, the place is unbearably hot and no traffic infrastructure.
I do like the complete absence of any crime though and I do mean ANY.
I reckon it is just one big pyramid scheme that is bound to implode.
September 3rd, 2008 at 10:56 am
Cap: The Burj even looks like a pyramid from certain angles. :) It’ll be a happy day when some kid in California invents something which ends our oil dependence and those crazy Arabs are only left with the fleets of rainbow-colored Bugattis they’ve bought with their petrodollars. The sooner we can end the redistribution of global wealth to those medieval cranks, the better.
September 3rd, 2008 at 11:29 am
Let them grow figs and chop off each others heads in the desert.
A very, very weird place.
You won’t see an Arab unless you go to the pub. Then, the place is full of them downing as much beer as they can while fondling the Filipinos before clambering into BMW X5’s and doing 100 mph through town. Middle aged Brits with Arsenal shirts holding up the bar, their eyes desperately following the slightest hint of skirt, dodgy Armenians doing dodgy deals, badly dressed Russians, Vietnamese skanks, timid Dutch.
As for entertainment, there isn’t any. You can watch the Lambos and Ferraris turn up at 5 star restaurants, unload their Russian whores and fat Arabs for a meal of rotten fish guts baked in vomit or you can sit in “swanky” cocktail bars on the 97th floor watching fat European businessmen trying to impress tight faced accountantesses from PWC.
September 3rd, 2008 at 11:38 am
Cap: The weirdest thing I’ve seen are those banquets where the top guys eat first (with their hands of course), leave, the next round of (lower status) people arrive to eat what’s left, and so on … no new food is brought in, it’s just scraps by the end. When I saw that I knew I was witnessing a seriously f’d up culture.
September 3rd, 2008 at 12:04 pm
Yes but you can always just go for the Ukranian whores and 80 cent gas. And boy do they have taxi service sorted - Dirt cheap, spotless and if the Indian disadvantaged person driving it tries to rip you off, he is executed on the spot by a grinning policeman.
Besides, if you’ve never had a Masala Dosa from the 360 Restaurant at the Jumeirah Beach, it’s worth getting your head cut off for.
September 3rd, 2008 at 2:52 pm
Cap: Thanks for the breakfast tip. I’m afraid I might have a fleck of cannabis in the tread of my shoe, which also merits on-the-spot execution apparently, so I’m avoiding the place for now.
September 3rd, 2008 at 7:17 pm
C.Maoxian said:
“The sooner we can end the redistribution of global wealth to those medieval cranks, the better.”
That will only happen when the leaders (and I use that term loosely) of the U.S. make it happen. It’s not to their benefit to do so at the current time.