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- Divesting Bank Stocks: Always Too Early
- David Goldman submits: On July 18, 2007, I went on Larry Kudlow’s CNBC show to warn that a “trillion-dollar AAA asset bubble” threatened the banking system, warning investors to get out of financial stocks. I was much too early. by David Goldman
- External links 2009-08-16
- Mini-Bubble in Toxic Assets
- David Goldman submits: TALF and PPIP asset-buying programs, I noted Aug. 2, have pushed up asset banks and made bank equity look frothy. Even the dicier parts of Commercial Mortgage Backed Securities (CMBS) are showing exceptional performance recently. Roughly two-thirds of a typical CMBS pool is rated AAA, which...
- External links 2009-08-11
- Banks Just Keep Getting Frothier
- David Goldman submits: Banks are getting frothy, I offered on July 15 before decamping for Italy. I spoke at a conference on ethics and financial markets sponsored by the Instituto Bruno Leoni in Rome, of small interest to this blog’s readers. Since then banks have outperformed the S&P 500,...
- External links 2009-08-02
- Banks are Already Getting Frothy
- David Goldman submits: It’s still asset prices. The more recent 2007 AAA vintage of subprime-backed securities — the real top of the market garbage — had a price pop yesterday in sympathy with bank stocks. ABX Index for 2007-2 Vintage AAA’s Backed by Subprime Mortgages from Markit...
- External links 2009-07-15
- Citigroup Stock: Top and Bottom Lines
- David Goldman submits: Citigroup C options have become very expensive in the leadup to preferred conversion July 28. Note that the gap click on chart to enlarge between implied volatility (now around 100%) and empirical volatility (at only 50%) is the widest in quite some time. That suggests that...
- External links 2009-07-15
- Bring Out Your Dead; Bank Zombies Will Eat Them
- David Goldman submits: As I predicted last March, American banks are hoarding rather than divesting the so-called toxic assets. The volume of trading in non-agency mortgage backed securities is considerably lower than many traders might have expected. That makes the stabilization of asset prices along with the stabilization of...
- External links 2009-07-14
- Japanese Banks: It Ain't So If You Say It Ain't So
- David Goldman submits: When is a non-performing loan not a non-performing loan? When you say it isn’t! Bloomberg reports: Oct. 6 Bloomberg — Japanese banks’ bad loans won’t be driven higher by a proposed moratorium on debt payments by struggling small companies, said Financial Services Minister Shizuka...
- External links 2009-10-06
- Dubai Fallout: Not with a Bang, But a Whimper
- David Goldman submits: Except for Greece, whose credit protection trades +72 basis points wider than it did a month ago, market response to the Dubai default is surprisingly muted, as the table below from Markit Partners makes clear: Worst Performing Sovereign Credit Default Swaps by David Goldman
- External links 2009-11-30
- Economy Watch: 'Stiggling' Our Way to Socialism
- David Goldman submits: I propose a neologism, “to stiggle,” meaning to make uneconomic loans for political reasons, in honor of Nobel Laureate Joseph Stiglitz. If only we had nationalized the banks, he complains, we would have been able to force the banks to make uneconomic loans that they did...
- External links 2009-11-01
- Main Street Seeing Worst Credit Crunch Ever
- David Goldman submits: Away from the too-pig-too-fail bailouts and subsidized sectors of the economy, the credit crunch is getting worse, not better. by David Goldman
- External links 2009-10-29
- Asset Bubble Bursting
- David Goldman submits: The following chart (the price of a derivative contract based on single-A rated commercial mortgage backed securities as provided by Markit Partners) speaks for itself click to enlarge: As defaults on commercial mortgages rise, the mini-bubble in toxic waste assets deflates. Note that the...
- External links 2009-10-27
- When Volcker Saved the Dollar
- David Goldman submits: An important anniversary slipped by this week: the fortieth anniversary of Paul Volcker’s dramatic tightening of credit on Oct. 6, 1979, after the dollar went into free-fall on foreign exchange markets. Inflation had crossed into double digits after four years of mismanagement by the Carter administration....
- External links 2009-10-09
- Bank Mini-Rally: All About Asset Prices
- David Goldman submits: Commercial mortgage-backed securities have shown some improvement just in time for bank second-quarter earnings. The improvement is modest, but it suggests that even the single-A rated tranches of CMBX deals are worth something, which is a less-than-catastrophic scenario. Here’s the performance of two of the Markit...
- External links 2009-07-14
- Parts of the Sub-Prime Market are Normalizing
- David Goldman submits: The 2006 vintages of subprime loans, reflected in the price of the Markit ABX index for AAA tranches, have shown a sharp improvement over the past couple of weeks. 2006 Subprime AAA’s Up 20% by David Goldman
- External links 2009-05-19
- Insurance: The Canary in the Coal Mine
- David Goldman submits: When things go wrong, what goes wrong the most? Yesterday’s worst performing names in the S&P were insurers, still the most vulnerable financial sector. Banks got whacked, but not nearly as whacked as Hartford Financial HIG click to enlarge: by David Goldman
- External links 2009-05-14
- Does P/E Have Any Meaning for Bank Stocks?
- David Goldman submits: What is a stock? According to the Nobel Prize winner Robert Merton a stock is a call option on the assets of the firm. It is undated, so that the option is perpetual. This makes equity valuation somewhat mystical when stock prices are very low and...
- External links 2009-05-07
- U.S.'s Credit Now Tied to Bank Stocks, Expect Market Volatility to Collapse
- David Goldman submits: Now it costs only LIBOR +44 bps to buy credit protection for five years against a default by the United States of America. That’s slightly more than half of the peak level of March, when the prospective collapse of the banking system persuaded the market that...
- External links 2009-05-06
- Citigroup Has Settled Into Zombie Status (Which Is as Good as It's Going to Get)
- David Goldman submits: The implied volatility of Citigroup C options is trading at “only” 150%, against 250% on March 6, the 52-week high for this variable. Citigroup options are pricey (that is, “implied volatility” is high) because owners of Citi preferred can’t find shares of common to short, and...
- External links 2009-04-27
- Still Puzzling Out the Impact (If Any) of Those Stress Tests
- David Goldman submits: If no-one can figure out what it is, it probably isn’t anything. As the Financial Times observes this morning, no-one can work out the actual impact of the “stress tests.” What it comes down to is that the regulators have given a rubber band of capital...
- External links 2009-04-27
- Stress Test Turns into a Snooze
- David Goldman submits: Banks were modestly higher after the Federal Reserve’s non-release of non-information of non-tests on — I almost wrote non-banks, but they actually are banks, more or less. What began as a tail-covering public relations stunt by Geithner turned into a potential embarrassment for the administration, which...
- External links 2009-04-25
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