Anxiety

Goldman profiting from naked shorting of leveraged loans

Jim Kim — Mon, 17 Nov 2008 13:49:18 -0500

The hits keep coming for Goldman Sachs, the one-time Teflon firm of Wall Street. The latest: Two funds have told the Loan Syndications and Trading Association that they think Goldman Sachs helped drive down prices of leveraged loans via naked short selling, reports Bloomberg. If true, that would mean Goldman is acting contrary to its clients' best interests. This sort of trading is not illegal per se, but given the political moment, it would not go over well. Of course, it's hard to ascertain exactly what is going on. The leveraged loan market is still a source of anxiety across the Street. Shorting was once unheard of in the market, Bloomberg notes, but times have changed. It seems like it would be hard to short the market, because it would require finding someone to speculate they would be poised to rise.

for more:
- here's the article

D-day for the hedge fund industry

Jim Kim — Sun, 16 Nov 2008 08:27:40 -0500

Some people in the hedge fund industry have taken to calling Saturday, Nov. 15, D-Day--the last day for investors to make a redemption request for the year. There is some fear that a flood of such requests could force hedge funds into more panic selling. Reuters reports there is indeed a lot of "anxiety" in the industry. But a previous deadline, Sept. 30 (for funds that require 3 months notice), has already passed. And the current deadline may pass with something less than an outright explosion. Many funds have taken proactive steps, either to impose redemption moratoriums or work out alternative arrangements. In any case, all expect hedge fund assets to trend down significantly. The issue is how long this down trend will last.

For more:
- here's a Reuters article

Related Articles:
Navigating the Hedge Fund Maze - October 2008

Bear Stearns job picture starting to clear

Tue, 06 May 2008 06:59:57 -0400

According to Financial News Online, JP Morgan Chase managers are sending letters to Bear Stearns employees informing staff whether they have a new job or not. The news service says that more than 70 percent of Bear employees (about 14,000) will be laid off, which if anything is slightly better than what people originally thought. The interesting twist here is that up to 1,500 JP Morgan Chase employees could lose their jobs. Laid off Bear employees will reportedly receive nine months pay and a cash payout equal to one-third of their bonus last year. So for employees, the end game is finally at hand. Most have been busy the last month or so exploring alternatives. Hopefully, this will prove to be the best thing to ever happen--a blessing in disguise.

For more:
- here's the Financial News Online article

Bank of America CEO faces shareholders

Thu, 24 Apr 2008 06:59:57 -0400

Bank of America CEO Ken Lewis took his turn before his shareholders. The questions were a bit shrill apparently, but he and his directors, like their big bank peers, managed to survive. Not that survival really was ever in doubt for any of the the top execs and directors. Still, the tone of annual meetings this year was a bit more pointed. A gadfly termed the Countrywide deal "junk" and a "piece of trash" and begged Lewis to cancel it, but that was about it for fireworks. Lewis, of course, defended the deal. But it's clear that if he can't make it work, the questions will only get tougher. It's fair to say he has bet the farm--and his reputation--on Countrywide.

For more:
- here's an article from bizjournals

Bear Stearns new hires face tough world

Mon, 21 Apr 2008 06:59:57 -0400

Bear Stearns new hires, the ones fresh out of school especially, are getting a hands-on lesson in business cycles. It was their misfortune to come out at a time when the industry is really swooning. JP Morgan Chase, according to the New York Times, has rescinded many offers (as we've previously noted), especially in investment banking, equities and fixed income trading. That has thrown these would-be stars into the worst job market in history. So it looks like many will be forced to re-invent themselves before their careers even start. I'm not sure this was covered in their coursework.

For more:
- here's the New York Times article

Related Articles:
Job anxiety at Bear Stearns
The future of Bear Stearns

Search the web for: Bear Stearns | JP Morgan Chase

Bank of America in sore need of capital

Mon, 21 Apr 2008 06:59:55 -0400

Bank of America's first-quarter earnings of 23 cents a share sorely lagged the average estimate of 41 cents. The somewhat ominous twist this time is that the bank seems to be feeling the effects of a slowing consumer market. Home equity loans, credit card loans and loans to small businesses all were pressured. The bank also took nearly $2 billion in writedowns on CDOs and leveraged loans. Unsurprisingly, the bank is aiming to bolster its capital levels. The New York Times reports that Bank of America executives have been speaking with China Construction Bank officials to sell a part of its 9 percent stake in the bank (it bought its stake for $2.5 billion in 2005). Bank of America is said to be in need of up to $10 billion in additional capital. This likely is not the only effort underway.

For more:
- here's an article on earnings from CNNMoney.com
- here's the New York Times article on capital raising efforts

Merrill's earnings disappoint

Thu, 17 Apr 2008 06:59:58 -0400

Merrill Lynch's loss of $2.19 a share was worse than the $1.99 a share analysts expected on average. That average estimate, of course, had moved lower dramatically as earnings day approached. It's clear that Merrill Lynch looms as the challenge of John Thain's career. The move to cut 4,000 jobs will help, but it's unclear if additional writedowns will be needed. The company wrote off about $4.5 billion in the first quarter. Some thought writedowns would be in the $6 billion range. So what to expect going forward? Well, if the markets were to re-inflate, that would help. For now, the company is in a cash-constrained situation that may require more capital.

For more:
- here's the release

Writedowns, writedowns everywhere

Tue, 15 Apr 2008 06:59:56 -0400

Meredith Whitney speaks with authority on Citigroup. She predicts Citigroup will announce an $11 billion writedown this Friday, to go with the $18 billion written down in the third and fourth quarters. That translates into a $7 billion loss in the first quarter, notes The Times. As for Merrill Lynch, which has written down $24 billion so far, she expect a further $6 billion writedown. All this likely will be preceded by a smaller (an expected $3 billion) writedown at JP Morgan. We'll see how all this plays out. Smaller banks may be the big surprise this quarter. They are really starting to feel the pain.

For more:
- here's the article from The Times

Earnings anxiety continues this week

Mon, 14 Apr 2008 06:59:55 -0400

Citigroup reports earnings on Friday. Merrill Lynch will report on Thursday. As a prelude, JP Morgan Chase and Wells Fargo will report on Wednesday. There's plenty to be nervous about. Writedowns are at the top of the list. Goldman Sachs estimates $12 billion in industrywide writedowns, with $2 billion of that at Merrill Lynch, notes MarketWatch. JP Morgan writedowns are expected to be nil. Investment banking units likely will reflect the severe drop off in business. Still, do not be surprised if the market rallies--in relief--on specific bits of earnings news, as long as it is not off-the-charts ugly.

For more:
- here's the article

Still wondering: Is the worst over?

Mon, 14 Apr 2008 06:59:54 -0400

Last week, Lloyd Blankfein, CEO of Goldman Sachs, threw his lot in with John Mack, his counterpart at Morgan Stanley, and told shareholders that there was light at the end of the tunnel. That's a view we've been pushing as of late, but it's fair to say there's a lot of cynicism about it. The run-up to this week's earnings announcement from Citigroup and Merrill Lynch seems to have led to some anxiety. No one would be surprised at some big writedowns. In fact, people expect it. Same goes for job cuts. There will be more. The issue is whether we're now at the bottom of the trough. I tend to think we are, though that hardly precludes more pain.

For more:
- here's a Financial Times article