crackerjack
Well-known member
http://business.timesonline.co.uk/tol/business/economics/article4936402.ece
Odds on a spring election?
Odds on a spring election?
global financial crash yay!
- Thread starter haji
- Start date
vimothy
yurp
Here it is:
WASHINGTON — The Treasury Department, in its boldest move yet, is expected to announce a plan on Tuesday to invest up to $250 billion in banks, according to officials. The United States is also expected to guarantee new debt issued by banks for three years — a measure meant to encourage the banks to resume lending to one another and to customers, officials said.
And the Federal Deposit Insurance Corporation will offer an unlimited guarantee on bank deposits in accounts that do not bear interest — typically those of businesses — bringing the United States in line with several European countries, which have adopted such blanket guarantees....
Citigroup and JPMorgan Chase were told they would each get $25 billion; Bank of America and Wells Fargo, $20 billion; Goldman Sachs and Morgan Stanley, $10 billion each, with Bank of New York and State Street each receiving $2 to 3 billion. Wells Fargo will get an additional $5 billion, reflecting its acquisition of Wachovia, and Bank of America receives the same for amount for its purchase of Merrill Lynch.
...The government will purchase perpetual preferred shares in all the largest U.S. banking companies. The shares will not be dilutive to current shareholders, a concern to banking...executives, because perpetual preferred stock holders are paid a dividend, not a portion of earnings. The capital injections are not voluntary, with Mr. Paulson making it clear this was a one-time offer that everyone at the meeting should accept.
And the Federal Deposit Insurance Corporation will offer an unlimited guarantee on bank deposits in accounts that do not bear interest — typically those of businesses — bringing the United States in line with several European countries, which have adopted such blanket guarantees....
Citigroup and JPMorgan Chase were told they would each get $25 billion; Bank of America and Wells Fargo, $20 billion; Goldman Sachs and Morgan Stanley, $10 billion each, with Bank of New York and State Street each receiving $2 to 3 billion. Wells Fargo will get an additional $5 billion, reflecting its acquisition of Wachovia, and Bank of America receives the same for amount for its purchase of Merrill Lynch.
...The government will purchase perpetual preferred shares in all the largest U.S. banking companies. The shares will not be dilutive to current shareholders, a concern to banking...executives, because perpetual preferred stock holders are paid a dividend, not a portion of earnings. The capital injections are not voluntary, with Mr. Paulson making it clear this was a one-time offer that everyone at the meeting should accept.
IdleRich
IdleRich
What's interesting to me is that Barclays - which is raising cash from its shareholders - is up 18% and is the biggest climber on the FTSE. On the other hand HBOS and Lloyds which took the government up on their offer for cash in exchange for a stake are the biggest fallers, down 11% and 7% respectively.
What is it that the market doesn't like about HBOS and Lloyds, is it that they want the companies to be backed by the government but not controlled for the future - hoping that Barclays will be able to return to high-risk strategies and excessive profits as soon as the crisis is over whereas the other two will be ham-strung by a commitment to sensible investing? Or is it nothing to do with that? I guess RBOS is up somewhat so it could just be something to do with concern over the merger, whether it will happen and whether Lloyds are getting good value.
What is it that the market doesn't like about HBOS and Lloyds, is it that they want the companies to be backed by the government but not controlled for the future - hoping that Barclays will be able to return to high-risk strategies and excessive profits as soon as the crisis is over whereas the other two will be ham-strung by a commitment to sensible investing? Or is it nothing to do with that? I guess RBOS is up somewhat so it could just be something to do with concern over the merger, whether it will happen and whether Lloyds are getting good value.
crackerjack
Well-known member
There was some bod on the news last night saying the Brown deal is a great one for the taxpayer and a shit one for shareholders - so I guess his reasoning is the govt is getting too many shares for not enough £££. Barclays is simply having (I think) a new shares issue underwritten by the govt, rather than being part nationalised. It's also benefitting from the extra liquidity.
IdleRich
IdleRich
Not sure I can buy that - the shares have come off loads already and there was no end in sight. It may not have been the best imaginable deal for shareholders but I don't see how any fair deal could have been better.
Yeah but I don't see that that is necessarily better. I mean, I guess it's better if you have shares and you expect dividends but is it going to be better for the way the company is run? Problem is, if Barclays do decide that they need the help they rejected then they are going to find it harder to get in the future. We'll see I guess.
crackerjack
Well-known member
Aren't shareholders only interested in the first part of that sentence though? And the second part, only in as much as it impacts on the first?
IdleRich
IdleRich
I'd say that shareholders are interested in the dividend but more interested in the overall value of their share - which after all represents the value of the holding. As I understand it the preference shares carry greater rights to a dividend but the pay-off is supposed to be that the government owned bank will be safer and hopefully will avoid exactly the kind of collapses that have occurred this year. In other words (I assumed) the expectation was that the overall value would increase and that this would more then compensate for being second in the queue with regard to dividends. Guess I was wrong though.
i don't as i need some more work.
crackerjack
Well-known member
The chances of the relevant indicators turning around in the next 3 weeks to the extent that people are no longer shitting thru their trousers at the thought of recession are about as likely as a victory for the Greens.
nomadthethird
more issues than Time mag
I was worrying about the same thing Swears mentions earlier today, then I remembered that even Karl Rove has admitted McCain has a snowball's chance in hell...
vimothy
yurp
Taleb's firm made some money from the crash:
Investors advised by ``Black Swan'' author Nassim Taleb have gained 50 percent or more this year as his strategies for navigating big swings in share prices paid off amid the worst stock market in seven decades.
Universa Investments LP, the Santa Monica, California-based firm where Taleb is an adviser, has about $1 billion in accounts managed to hedge clients against big moves in financial markets. Returns for the year through Oct. 10 ranged as high as 110 percent, according to investor documents. The Standard & Poor's 500 Index lost 39 percent in the same period.
``I am very sad to be vindicated,'' Taleb said today in an interview in London. ``I don't care about the money. We're proud we protected our investors.''...
``The Black Swan Protection Protocol is designed to break even 90 to 95 percent of the time,'' Spitznagel said. ``We happen to be in that other 5 to 10 percent environment.''...
The S&P 500 dropped 18 percent last week, its worst week since 1933, on concern that the credit crunch would cripple the financial system and trigger a global recession.
``We got a lot of giggles when we said we're targeting 20 percent moves,'' Spitznagel said. He and Taleb declined to confirm the investment returns listed in the documents, which were reviewed by Bloomberg News.
Taleb's strategy is based on buying out-of-the-money options -- puts and calls whose strike price is either lower or higher than the market price of the underlying security. A put option gives the buyer the right, though not the obligation, to sell a specific quantity of a particular security by a set date. A call option gives the right to buy a security.
The Black Swan Protection Protocol bought puts and calls on a portfolio of stocks and S&P 500 Index futures, along with some European shares. The Black Swan Protocol doesn't rely on commodities, currencies or insurance on bonds known as credit default swaps, Taleb said.
``We refused to touch credit default swaps,'' Taleb said. ``It would be like buying insurance on the Titanic from someone on the Titanic.''
Universa Investments LP, the Santa Monica, California-based firm where Taleb is an adviser, has about $1 billion in accounts managed to hedge clients against big moves in financial markets. Returns for the year through Oct. 10 ranged as high as 110 percent, according to investor documents. The Standard & Poor's 500 Index lost 39 percent in the same period.
``I am very sad to be vindicated,'' Taleb said today in an interview in London. ``I don't care about the money. We're proud we protected our investors.''...
``The Black Swan Protection Protocol is designed to break even 90 to 95 percent of the time,'' Spitznagel said. ``We happen to be in that other 5 to 10 percent environment.''...
The S&P 500 dropped 18 percent last week, its worst week since 1933, on concern that the credit crunch would cripple the financial system and trigger a global recession.
``We got a lot of giggles when we said we're targeting 20 percent moves,'' Spitznagel said. He and Taleb declined to confirm the investment returns listed in the documents, which were reviewed by Bloomberg News.
Taleb's strategy is based on buying out-of-the-money options -- puts and calls whose strike price is either lower or higher than the market price of the underlying security. A put option gives the buyer the right, though not the obligation, to sell a specific quantity of a particular security by a set date. A call option gives the right to buy a security.
The Black Swan Protection Protocol bought puts and calls on a portfolio of stocks and S&P 500 Index futures, along with some European shares. The Black Swan Protocol doesn't rely on commodities, currencies or insurance on bonds known as credit default swaps, Taleb said.
``We refused to touch credit default swaps,'' Taleb said. ``It would be like buying insurance on the Titanic from someone on the Titanic.''
Grievous Angel
Beast of Burden
I'm getting annoyed by the miserable dribble of self-serving wank issuing from the apologists for the banks. Bad deal for shareholders my arse. They backed companies that didn't know what they were doing and exposed themselves to massive, and patently obvious for the last decade, agency risk. Now the tax payer has put itself in hock for the next ten years or more to save the bank and leave them with a chance of making their money back. And still they expect more!
Fuck them. Seriously.
As for Brown... yeah he did an OK job in fixing the crisis, for now at least. Well, the senior civil servants who actually did the work (and according to the FT had a struggle persuading him to act) did a good job. But it's largely a mess of his own making. The explosion in dodgy derivatives and the consequent, crazy ballooning of liquidity ratios came about on his watch. In darker moments I sometimes wonder if he actually wanted this to happen so it would give him a chance to shine. I think he's a selfish fucker in any case. This whole thing is bad for Labour. But it's just as bad for the Tories, as Rich says they can't lay a finger on Labour over this. It really is the collapse of Thatcherite deregulation. It would benefit the Lib Dems if Vince Cable was in charge but it's my nice but dim local MP instead, so it won't. It is good for Obama, but I don't know if it's good enough; I think we'll find out just how racist America is in three weeks and I think we might get a nasty surprise.
In five years the economy will have bounced back (and in all likelihood another asset bubble will have blown up). Hopefully the good side of hedge funds will re-emerge - that of providing greater transparency and liquidity - though since they have largely been doing the exact opposite of that for the last four or five years (bundling toxic loans with good ones is the very definition of pricing opacity). But stock markets will bounce along the bottom for a good while yet.
Fuck them. Seriously.
As for Brown... yeah he did an OK job in fixing the crisis, for now at least. Well, the senior civil servants who actually did the work (and according to the FT had a struggle persuading him to act) did a good job. But it's largely a mess of his own making. The explosion in dodgy derivatives and the consequent, crazy ballooning of liquidity ratios came about on his watch. In darker moments I sometimes wonder if he actually wanted this to happen so it would give him a chance to shine. I think he's a selfish fucker in any case. This whole thing is bad for Labour. But it's just as bad for the Tories, as Rich says they can't lay a finger on Labour over this. It really is the collapse of Thatcherite deregulation. It would benefit the Lib Dems if Vince Cable was in charge but it's my nice but dim local MP instead, so it won't. It is good for Obama, but I don't know if it's good enough; I think we'll find out just how racist America is in three weeks and I think we might get a nasty surprise.
In five years the economy will have bounced back (and in all likelihood another asset bubble will have blown up). Hopefully the good side of hedge funds will re-emerge - that of providing greater transparency and liquidity - though since they have largely been doing the exact opposite of that for the last four or five years (bundling toxic loans with good ones is the very definition of pricing opacity). But stock markets will bounce along the bottom for a good while yet.
craner
Beast of Burden
A bit of fun just to lighten the mood:
There is only one man in the parliamentary Conservative party who truly understands what is going on, and who has an idea of how to fix it over the next five years or so.
That is John Redwood.
Ha ha ha ha.
There is only one man in the parliamentary Conservative party who truly understands what is going on, and who has an idea of how to fix it over the next five years or so.
That is John Redwood.
Ha ha ha ha.
IdleRich
IdleRich
Sounds impressive but you would expect most people who buy (and hedge) options to make money in times of stock market volatility. Option pricing depends on a number of variables, most of which are known to a greater or lesser degree except for the volatility of the underlying stock so when an option is traded the value is often recorded in terms of what assumed volatility was paid. If you bought the option at a low nominal volatility but later on the stock is clearly moving at a higher volatility then you will obviously make a profit on the option.
Slothrop
Tight but Polite
I've been getting vaguely annoyed - especially given that economic problems are aiui made worse by failures of public confidence - by the way that headline writers seem unable or unwilling to distinguish between "recession" as in "two successive quarters of negative growth" and "the great depression" as in "mass suicide in the City, entire country crippled, three quarters of the workforce unemployed, people eating rats to stay alive."
I agree. I don't think it's anything fancy. Not to drop names or nuffin' but I spoke to Taleb about his trading strategy a few years ago - IIRC, he said that the toughest thing about it is that it runs counter to most traders' natural instincts. The options he buys are deep out-of-the-money, so they're cheap and most of the time they expire worthless - so the strategy basically racks up lots of small losses and occasionally makes a spectacular gain.
I think. I'm not all that clued-up on options.
crackerjack
Well-known member
When does recession become depression, technically? Is it, say, two years of negative growth, or do we measure it in bodies flying out the windows of the Gherkin?