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Note the “nature” of the $5. In so far as this sum pertains to a potential loss in lending, it belongs to the realm of credit. In so far it is bought and sold as a commodity with fluctuating price, it is in the realm of market. It is in the latter capacity that it …
Anatomy of a Crisis: The “Credit Woes” of the Summer of ’07 – (5) Read More »
Option Player is a piker. He wants to make it big in the markets but has neither Arbitrageur’s acumen nor Lender’s capital. The combination makes him vulnerable to manipulation. Against this backdrop, Arbitrageur and Lender appear at his door. The arbitrageur is a descendent of the Music Man and knows the Alpha and Omega of …
Anatomy of a Crisis: The “Credit Woes” of the Summer of ’07 – (4) Read More »
To arbitrage credit, speculative capital must first bring it into its orbit, make it “game.” The idea develops gradually from the practical consideration of trading. The arbitrageur is the personification of speculative capital. In that capacity, he is a practical man, interested only in profit and loss. When he sees a new opportunity, he rushes …
Anatomy of a Crisis: The “Credit Woes” of the Summer of ’07 – (3) Read More »
Here is the economics columnist of The New York Times, Paul Krugman, on the cause of the recent financial crisis (Feb 15, ’08): Why has a crisis that began with loans to a limited group of home buyers ended up disrupting so much of the financial system? Because, ultimately, it’s more than a subprime crisis; …
i) A nomadic capital with the need for rapid deployment under varying circumstances needs a new organizational shell to operate; the old mutual fund structure, where the type of activities must be specified in advance, would not do. Hence, the rise of hedge funds, where prospectus and offering memorandum give virtually unlimited discretion to the …
Anatomy of a Crisis: The “Credit Woes” of the Summer of ’07 – (2) Read More »
In the summer of 2007, financial markets in the US and UK suffered a heart attack. The events leading to this seizure have been covered in detail from many perspectives but always within the same prescribed framework: the crisis as the culmination of a series of unfortunate events set in motion by (choose your emphasis) …
Anatomy of a Crisis: The “Credit Woes” of the Summer of ’07 – (1) Read More »
Here is what Gary Crittenden, Chief Financial Officer of Citigroup, had to say about the losses Citi suffered in CDOs, courtesy New York Times: We have a market-risk lens looking at those products, not the credit-risk lens looking at those products. When it in fact was a credit event. The bank, we learn, was “caught …
In an article about the recent credit squeeze, Financial Times (February 5, p. 20) reminded us: Several years ago, Hicks Muse and Kohlberg Kravis & Roberts each wrote cheques to acquire Regal Cinemas. They then loaded an additional $1.8bn in debt on to the company. The movie chain could not service all that debt and …
That in the midst of the current market mayhem my first post on this blog is about a Supreme Court case could reveal a thing or two about me. So consider this a self introduction. The case in point is the just decided STONERIDGE INVESTMENT v. SCIENTIFIC-ATLANTA. The editors in The New York Times and …