Royal Bank of Canada

Case study: How cities and states ended up being hedge funds

Jim Kim — Sun, 02 Nov 2008 09:04:50 -0500

The New York Times offers an interesting story of how cities and state entities ended up ensnared in the global credit crisis. We've noted that many of them face some severe financing hardships, even with the crisis abating a bit. The worst hit are those that invested in certain CDOs. The Times looks at a school district in Wisconsin that ended up borrowing $165 million from a free-wheeling bank in Ireland named Depfa, and using $35 million of its own money to invest in synthetic CDOs issued by the Royal Bank of Canada. In doing so, they were following the advice of a banker who had all of two hours of training on CDOs. I'm sure the commission was huge. Lots of other government entities are in the same boat. Much of this will end up in court.

For more:
- here's the article

Citigroup anlayst gets it wrong--really wrong

Thu, 08 May 2008 06:59:56 -0400

Shannon Cowherd, bank analyst at Citigroup, raised eyebrows last week when she put out a note to clients estimating that the Royal Bank of Canada faced a whopping $10.2 billion in writedowns. Whew! The Globe and Mail noted that no other analysts was expecting more than $800 million. The bank issued a release saying the analyst had her facts wrong. The next note to clients had a revised estimate, $1.8 billion, based in part on "incremental information." Still high, but in the ballpark. Analysts are still influential, even in this post-Spitzer era. These sorts of gaffes are rare, but they do happen. The sad part is that some IR employee likely took the blame internally.

For more:
- here's the Globe and Mail article

ALSO NOTED: Countrywide posts surprising, massive loss; Analysts upgrade Wachovia;and much more...

Wed, 30 Apr 2008 06:59:50 -0400

Company News:
> HSBC, Lone Star extends deal date. Article
> S&P credit markets hits McGraw-Hill earnings. Article
> Countrywide posts a surprising, massive loss. Article
> More criticism of the Bear Stearns "bailout." Article
> SkyBridge Capital invests in Capital Returns. Article
> Analysts upgrade Wachovia. Article
> Citigroup says to sell Royal Bank of Canada. Article

And Finally... Boost productivity by slacking off more at work. Article