Tuesday, May 19, 2009

Securitization and Off-Balance-Sheet SPE's

FASB is going counter to the approach on M2M and will be requiring additional disclosure for off-balance-sheet loans. This is significant because it may further reduce the credit available in the shadow banking system, as the banks that ultimately support the shadow system are now going to have to disclose their exposure.

A few other posts or articles on securitisation/shadow banking system that I've noticed today-
Marginal Revolution's take and Tyler refers to The Economist article here and also Arnold King here.

Monday, May 18, 2009

Rating Agencies on the hot seat

The rating agencies are getting their day in front of Congress. I'll be interested to see how this works out.

My hope is that they would somehow be held legally liable in the same way that auditors are when they fail to apply rigorous standards to their work.

Sunday, May 17, 2009

Shadow banking system

I was actually reading chapter 7 of Animal Spirits, which provided a quick summary of the shadow banking system. I then did my scan of some blogs that I follow and found this incredibly detailed, yet not too long, post from Zero Hedge. It's probably the best description of the shadow banking system and it's role in the macro-economy that you will find.

On a positive note, there's at least some support for the idea that the shadow system is holding up and maybe bouncing back.

Friday, May 15, 2009

Fed updates

Some updated Fed data and the WSJ analysis of the CPI and deflation risk.

Dallas Fed official gives Fed pat on the back.

Tuesday, May 12, 2009


A couple risks-

Consumers are too debt laden to bail out the American economy, so we're dependent upon foreign trade or investment to bring America back. WSJ hopes China can help.

The risk of so much U.S. debt.

And for the 'oh, by the way' category, even tax month was negative and social security is drying up (still).

SNL on the Stress Tests

Sunday, May 10, 2009

What's on my Kindle

A snapshot of what's currently on my Kindle:
Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism by George Akerlof and Robert Schiller. I just started this one and it's probably not for everyone, but as a fan of behavioral economics/finance I've found it interesting so far.

House of Dimon by Patricia Crisafulli. I was not very impressed by this book, I got it because I'm a fan of Jamie Dimon's and it started out pretty well. However, it never got below the surface and started getting very repetitive.

House of Cards: A Tale of Hubris and Wretched Excess on Wall Street by William Cohan. I liked this book a lot and it gives a rather in-depth view of the Bear Stearns culture and inner workings that led to its demise.

Some samples that I want to test before committing to the full book (and a great feature of the Kindle)-
The Return of Depression Economics and the Crisis of 2008 by Paul Krugman.
Predictably Irrational by Dan Ariely (this one I started and really liked, I'm just waiting for an updated version to be released towards the end of the month).
Lords of Finance by Liaquat Ahamed.

And I always have a Sunday New York Times and a random day of the FT, although I don't subscribe to either.

Stress Test Follow-Up

I could not find a solid answer on the basis of whether quarterly results were included in the anticipated capital calculations. However Friday morning on Squawk Box it was mentioned that the results included estimated normal profits. So the question becomes, is the estimate reasonable? If it's too low, banks will need more, if it's too high banks will need less capital. Fortunately from the accounting standpoint, the Fed is requiring the capital raising plans to be delivered within 30 days and with a timeline not to exceed 6 months, which takes pressure off of the reporting of the bank's financial results (at least for now).

A couple different views-
Economist.com thinks the capital levels may have been set too low.

The Wall Street Journal has an article on the back and forth that occurred to keep the stress tests from being worse and requiring banks to raise additional capital.

Thursday, May 7, 2009

So today was the day

I have not had time to review the entire report, but if Fast Money on CNBC had it right during their coverage, the one thing that this showed, is the potential impact of the the credit card debt. Besides that, is seemed that the minimum additional capital requirement were not as bad as expected.

I'm still not sure on the exact details, I seem to remember hearing that the capital requirements were all based on 12/31/08 numbers, if that's true for the banks that claim a profit as of 3/31, perhaps the capital requirements have already gone down. I'll have to see if anything comes out about this and post what I find in the next couple days.

Monday, May 4, 2009

Credit card problems and rating agencies

I've written on this topic before and it keeps coming back into the news, although not having much of an effect on the market. Today's story comes from Forbes.com. Also, a more general piece on the Fed from Bloomberg.

I hold firm on the belief that as unemployment increases there will be increased pressure on banks, and a primary shoe that has yet to hit the ground is unsecured consumer credit.

Another topic I've written on in the past, the ineffectiveness of the credit rating agencies...seems like Economist.com agrees.

Wide-Screen Kindle

Wow, this came much faster than expected, but according to most reports Amazon.com is going to release the next version of the Kindle on Wednesday.

The larger screen size is said to target newspapers and magazines to accommodate better display of advertising and insets. In addition, the new screen will allow Amazon to enter the e-textbook market.

Instead of pre-ordering Wednesday as soon as it hits the site (assuming this is all true) I do plan to wait a little, see the new features and then decide whether to jump in. I can hardly justify 2 Kindle's within 3 months, that's a lot of money to save a few dollars a book.

Saturday, May 2, 2009

Swine Flu's Economic Impact

The Economist focuses on Mexico, and it's clearly not going to be good for Mexico. From the impact of cancelled events to the countries with travel restrictions impacting tourism, thus far Mexico is the nation most impacted by the outbreak. (personally, although not official yet, I no longer plan to visit Cozumel at the end of the month.)

Overall, Seeking Alpha believes that the global impact will be minimal.

Friday, May 1, 2009

Protectionism in Asia?

Nouriel Roubini has a piece in Forbes discussing the future of large global imbalances. The basic question is whether the large balances in Asia (primarily China) and in the commodity producing Middle East nations is sustainable or whether they should focus on increasing domestic consumption. Therefore reducing their dependence on foreign nations (such as the U.S.) for economic growth. However, since these countries are largely invested in the U.S. one must wonder whether this approach may cause a significant unwinding in the global macroeconomic environment, one that may extend economic depression beyond what we've witnessed to date. Ultimately the IMF will play a key role in ensuring that any potential unwinding at the macro level will be orderly.

So while we consider protectionist policies in the U.S. perhaps we should pay more attention to protectionist policies developing with are largest trading partners, especially the ones that own significant amounts of our debt. This may be the ultimate house of cards.