International Investing

I asked one investment banker what might cause half of North America’s top corporations to default. No ordinary economic recession or natural disaster short of an asteroid strike could do it: no hurricane, for example, and not even ‘the big one’, a catastrophic earthquake devastating California. All he could think of was ‘a revolutionary Marxist [...]

Let’s say you file a claim with the insurance company after a disaster. Instead of getting a check, the insurance company tells you that it would prefer NOT to pay the claim since that would put the insurance company in a precarious financial position. What would your reaction be? Some banks are confronting a similar [...]

This WSJ article about ACA Capital Holding, shows financial firms adeptness in managing their balance sheet. ACA, ostensibly an insurance firm, was undercapitalized from the beginning. Based on the firm’s ‘A’ credit rating, the firm has a veneer of security which fell apart when S&P downgraded them to triple-C in December – a canary in [...]

Mauldin describes Level 3 assets - what they are and where they are.
Under FASB terminology, Level 1 means assets that can be marked-to-market, where an asset’s worth is based on a real price, like a stock quote. Level 2 is mark-to-model, an estimate based on observable inputs which is used when no quoted prices are [...]

Bloomberg has the details here. Keep in mind you can run the correlations anyway you want, VIX does not correspond to market direction.

From BusinessWeek:
It’s white-knuckle time on Wall Street as firms try to prevent the subprime mess from spreading. The hedge fund blowup has suddenly thrown the world’s biggest financial institutions into a game of brinkmanship that will end in one of three ways: a quick, brutal crash of the subprime mortgage market and possibly the broader [...]

Per HedgeWorld,
Peter Wuffli’s sudden departure from his role as chief executive of Swiss banking giant UBS has caused some speculation among the local press, who are describing it as a “surprise move.” …
… In recent years UBS has rapidly overtaken Credit Suisse as Switzerland’s largest bank, but has suffered a number of setbacks lately. As [...]

According to the Financial Times, buyers are showing no interest whatsoever in the wreckage left over from Bear’s two subprime hedge funds — at least, not at Bear’s ask price of 11 cents on the dollar.
Investors in the worse-hit of two stricken Bear Stearns hedge funds are offering to sell their holdings for as little [...]

Now KKR wants to IPO?
In my opinion, Blackstone was just in time. I wonder if Blackstone quietly passed some money to help Bear Stearns take the hit for its two blown-up CDO funds.
A loud ‘pop’ in the market for CDOs would ratchet up bond yields yet again, squeezing Blackstone’s bottom line and badly marring its [...]

The WSJ:
J.P. Morgan Chase & Co., a lender to Bear’s hedge funds, was scheduled to begin an afternoon auction of collateral it held from the Bear fund, mainly mortgage-backed debt. Minutes before the sales were to begin, the firm pulled back. Later, J.P. Morgan came to terms with Bear to eliminate its exposure to Bear’s [...]