Posts from — August 2007
Diamond Dealers Don’t Want Pricing Transparency
Add value? The fact these guys have been around so long is amazing. The average consumer can’t grade a diamond but besides that what information does a dealer provide that you can’t find on google?
“You don’t need Rapaport’s commoditization scheme to put out prices that consumers will look at and say ‘Hey, this is the price, why am I paying Mr. Retailer more?’” he said.
How retailers compete in this environment depends on the added value they bring to the process, he said.
“Price is not everything, but with price transparency you have to add value,” Rapaport said.
August 31, 2007 No Comments
Will commercial paper roll-over cause a crash?
Speculation in todays Gartman Letter:
Of the greatest concern to us, however, shall be the
roll-over of asset backed commercial paper at the month’s
end tomorrow. If there is a place in the capital markets
where a very real leak can spring it is here. As an old
friend at one of the most important investment banks in the
world wrote to tell us yesterday thatthe Asset Backed Commercial Paper is almost to
the point of being basically defunct and this is very
timely as tomorrow will be the 30th of the month
and twice the paper that the market has been able
to roll is due. There is a high chance it may not get
rolled. This is essentially telling us that banks do
not have faith in each others’ collateral. This is no
small market and to me no small issue for if banks
don’t trust each others collateral, who does? The
ABCP market currently stands at $1.1 trn but is
coming down rapidly as more and more paper fails
to roll and gets thrown back on the books of banks
who then have to “average down on a bad
position” by funding the position with good capital
that is typically used for more traditional forms of
credit [Ed. Note: Emphasis ours.]
August 30, 2007 No Comments
Iraq’s First Hedge Fund
$100 million! From the WSJ:
Iraq Fund LLC, Iraq’s first hedge fund, aims to raise as much as $100 million within 18 months for investment in companies listed on the local bourse and in state enterprises, a company official said.
The fund, launched despite the ongoing violent conflict in the country, primarily targets undervalued, Iraq Stock Exchange-listed firms and state-owned companies in manufacturing, construction, cement and pharmaceuticals, Iraq Fund operational director Rand Hultz told Dow Jones Newswires at a Dubai conference.
“We target $100 million. There have been delays, but we’d like to do it within the next 12 to 18 months, Hultz said.
August 29, 2007 6 Comments
Hedge Fund Strategy of the Month – Fixed Income Arbitrage
From the Financial News linked in FierceFinance:
The fixed income arbitrage index was up 0.31%. Each of the other nine strategies covered by Credit Suisse/Tremont lost money over the same period.The overall investable hedge fund index published by Credit Suisse/Tremont was down 1.54% for the first two weeks of August.
However, many individual hedge funds following the fixed income arbitrage strategy lost money, including seven of the 10 that reported their results for the first 10 days of August.
August 28, 2007 1 Comment
Yen vs the S&P
WSJ has a great blog post and chart:
Increasingly over the last several months the yen and the Standard & Poor’s 500-stock index have been inversely correlated. That is, when the yen has weakened, the equity market has done better, in part because of the popularity of yen-carry trades, where investors borrow in low-yielding yen to buy assets elsewhere. When the yen strengthens, this trade isn’t as profitable.
The yen’s weakness has been the S&P 500’s strength.As a result, the yen has been as a result a good barometer for how comfortable investors are with risk, says Bill O’Grady, chief global investment strategist at A.G. Edwards, in a commentary today. “If the yen is weakening, it suggests investors are more tolerant of risk and will return to equities, emerging markets, etc.,” he writes. “A stronger yen, on the other hand, indicates continued risk aversion and will tend to benefit assets investors use for safety, such as Treasury bonds.
August 27, 2007 No Comments
A Gross Statist – Bill Gross Swings Left, Again!
You might excuse Bill Gross’s recent “taxes aren’t high enough” rant as politicking. Perhaps he was trying to draw attention away from his own obscene wealth while maintaining the free market principles that brought him such riches. He wouldn’t be the first person to say that people aren’t paying enough in taxes and neglecting to write the Treasury department a check to make up for his own perceived short coming.
It’s harder to explain away his recent call to have George Bush bail out the housing market:
“Write some checks, bail ‘em out, prevent a destructive housing deflation that (Fed Chairman) Ben Bernanke is unable to do. After all ‘W’, you’re ‘the Decider,’ aren’t you?” Gross wrote.
…
Gross made a handful of policy recommendations for the White House, including creating an agency to coordinate bailouts or aid for homeowners and making adjustments in the government’s Federal Housing Authority program.
August 23, 2007 No Comments
38,000 Mortgage Job Losses So Far
Will NFP seasonally adjust these out?
More layoffs are announced daily. On Wednesday, Lehman Brothers Holdings Inc. closed its “subprime” mortgage business, laying off 1,200 workers at 23 offices; Scottsdale, Ariz.-based 1st National Bank Holding Co. closed its wholesale mortgage unit and cut 541 jobs, and Accredited Home Lenders Holding Co. added 1,600 positions to the heap. The night before, banking giant HSBC said it would close a main financing office and cut 600 jobs.
Since the start of the year, more than 38,000 workers have lost their jobs at mortgage lending institutions, according to recent company layoff announcements and data complied by global outplacement firm Challenger, Gray & Christmas Inc. Meanwhile, construction companies have announced nearly 20,000 job cuts this year, while the National Association of Realtors expects membership rolls to decline this year for the first time in a decade.
August 22, 2007 No Comments
Who is on the Plunge Protection Team?
The market’s surprise rally late last Thursday caused many to credit the shadowy Plunge Protection Team with propping up the market. US News has the info:
Yes, the Plunge Protection Team is real, except its actual name is the President’s Working Group on Financial Markets, or PWG. (The nickname comes from an old Washington Post headline.) After the 1987 stock market crash, President Reagan authorized the creation of the PWG—consisting of the Treasury secretary, the Fed chair, and the heads of the Securities and Exchange Commission and the Commodity Futures Trading Commission, so that top regulators and economic policy chiefs could formally consult with one another in event of a financial crisis as well as prepare a plan of action in case of a financial markets meltdown. For instance, it might advise the president to temporarily close the markets, as happened after the 9/11 terrorist attacks.
Who is on it? We don’t know for sure, but futures guru John J. Lothian names two candidates in his newsletter today, ” I am increasingly convinced that Citadel Investment Group’s Ken Griffin is the Chairman of the “Shadow Plunge Protection Team” and Warren Buffett is also a member of the team.”
August 21, 2007 No Comments
What is a crack-up boom?
Whenever there is a violent market move a trader asks himself: Is this the start of a new trend or a just temporary reversal? When the smartest guys in the market, Goldman Sachs, get hammered, even the causual 401(k) watchers have to be wondering if the market continue to fall or will it regain its upward momentum. Count the Austrians for the bearish camp.
For over a decade, Austrian economists have been bearish because of the Fed’s exponential expansion of money and credit (among other things). If the market continues to sputter, expect to hear the names Mises, Hayek, and Rothbard more frequently.
This passage is excerpted from Mises’ ‘Human Action’ and explains a crack-up boom.
The characteristic mark of this phenomenon is that the increase in the quantity of money causes a fall in the demand for money. The tendency toward a fall in purchasing power as generated by the increased supply of money is intensified by the general propensity to restrict cash holdings which it brings about. Eventually a point is reached where the prices at which people would be prepared to part with “real” goods discount to such an extent the expected progress in the fall of purchasing power that nobody has a sufficient amount of cash at hand to pay them. The monetary system breaks down; all transactions in the money concerned cease; a panic makes its purchasing power vanish altogether. People return either to barter or to the use of another kind of money.
Read the rest of it or even all of Human Action online here.
August 20, 2007 No Comments
Buying at the Peak
Hedge fund assests increased to record levels last quarter just in time to catch the coming decline:
Total hedge fund asset levels increased by 8% in the second quarter of 2007, to $2.593 trillion from $2.401 trillion in the first quarter of 2007, according to a report by HFN (HedgeFund.net).
The Q2 2007 HFN Hedge Fund Industry Asset Flow Report, which details total assets and asset flows across strategies, sectors, regions and asset classes in which hedge funds operate, revealed that new assets allocated to the industry were estimated at $107.3 billion in Q2, while performance gains accounted for an additional $89.6 billion, the second largest gains on record.
August 17, 2007 No Comments
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