The investment Blog - crisis timeline archive

Final Confirmation: AIG couldn’t pay its CDS

zyakaira — Thu, 28 Jan 2010 14:15:07 +0000

2006 news: AIG has exited CDS business. Redacted documents from the Geithner and Paulson grilling

AIG’s mysterious Schedule A finally revealed

The new information also reveals that of the 178 tranches of CDOs that AIG insured, some 14% were on deals issued after 2005. That’s critical because in December 2007, former AIG Financial Products head Joseph Cassano had said AIG largely got out of the CDS business by the end of 2005.

The newly disclosed information also reveals that Goldman not only bought a lot of CDS from AIG to protect itself; the Wall Street firm also originated a good number of the CDOs that were in SocGen’s portfolio. Some of the Goldman deals in SocGen’s portfolio that AIG had insured includes CDOs with names like Adirondack 2005, Putnam Structured Product CDO 2002 and Davis Square Funding IV.

Janet Tavakoli, a derivatives consultant who has called the AIG bailout a gift to the Wall Street banks, said the issue isn’t just what deals AIG insured, but the underlying assets in those deals. She noted that a goodly number of the CDOs held by the banks also held pieces of other CDOs.

Goldman Sachs, Societe Generale, Deutsche Bank, Merrill Lynch and other banks sold their ailing collateralized debt obligations to the New York Fed-sponsored entity, Maiden Lane III. AIG then canceled out the CDS contracts it had sold as default insurance on those 178 CDOs.

“If all of this had come out in the public domain in late 2008, Goldman Sachs and Merrill would have been deeply embarassed and the Federal Reserve woudl have been questioned,” said Tavakoli.1

Filed under: Financial Markets, Financial Services, US Tagged: CDO, CDS

Advantage zyaada | How Quants did it? – Business WeeK

zyakaira — Mon, 25 Jan 2010 14:19:14 +0000

Robert Litterman, chairman of Goldman Sachs Group Inc.’s quantitative hedge-fund group, will step down at the end of this month, a move planned before President Barack Obama’s call yesterday to limit proprietary trading at banks, according to people familiar with the situation.

Litterman, a 24-year Goldman Sachs veteran, advised a unit that ran Global Equities Opportunities, a quantitative hedge fund that required a $3 billion cash infusion in 2007. The fund, which used mathematical models to trade securities, closed last month after its assets fell to $200 million from as much as $7.5 billion, according to two people familiar with the situation.

Litterman’s departure was not connected to the fund’s closure, the people said. Global Equities and Goldman Sachs’s Global Alpha fund lost value in August 2007 when many quantitative managers raced to exit trades simultaneously. In June 2008, Litterman said the hedge funds suffered because they were too large for a “de-leveraging explosion.”

Advantage zyaada | Litterman Said to Retire From Goldman Sachs Hedge-Fund Unit – BusinessWeek.

Posted in Bank Stocks, Financial Markets, Global

China’s new problem | Huffington Post

zyakaira — Sun, 24 Jan 2010 09:44:46 +0000

Add someone in Hongkong who writes a default swap for them ( insurance, in case of default, maybe the local Nankiang units can diversify ) and you have another perfect crisis, for the Chinese to fund this time. And they’ve defaulted on quite a few contracts themselves! ( commodities, October 2009)

Citi taught us to use Off Balance sheet financing

Banks are moving loans off their balance sheets in order to dress up their accounts for worried regulators.Only this time it isnt Citigroup C or State Street SST thats involved, but Chinas big banks.In November Chinas banks packaged and then sold $18.6 billion in loans to Chinese trust companies, removing those loans from the banks balance sheets, Shanghai Benefit Investment Consulting has told the Wall Street Journal. Thats a huge 54% of all the new loans banks made in the month according to government figures. For the year the total of loans packaged and sold by banks comes to almost $90 billion.The repackaging and sales come as Beijings bank regulators have started to worry that the countrys banks dont have enough capital to back all the loans theyve made in 2009. So far in 2009 Chinas banks have made more than $1 trillion in new loans, according to government figures. Regulators have begun to press banks to raise more capital to buttress their balance sheets.By selling the loans to trust companies, banks take them off their balance sheets. That has the effect of reducing the amount of loans that the banks look like they have made. That in turn reduces the amount of capital it looks like they need to raise to support these loans

via James Jubak: Chinas Banks Copy Citigroup in Hiding Bad Loans Off Their Balance Sheets.

Posted in China, Financial Services, GDOW, Global, US Tagged: Bank Stocks, Banking, Banks, Bubble, China, Citi, Emerging Markets, J P Morgan, Loan crisis, Loans, O'nomics, Off Balance Sheet

China formalises Private Equity forays | Bloomberg.com

zyakaira — Mon, 17 Aug 2009 06:45:36 +0000

zyakaira notes: With more than 400 funds already operating in China, the government is taking steps to formalize regulation as this may be the big ticket boost need for the Chinese economy to grow. Understandably, the first few funds are mostly equity focussed domestic funds.

Goldman Sachs Group Inc.(GS), also is planning to raise a domestic private-equity fund for his Beijing-based Hopu Investment Management Co., after raising $2.5 billion from overseas investors. Tax rate differences between Hongkong and China may not be addressed in one go in upcoming regulation

(Bloomberg) Blackstone Group LP’s(BX) joint venture with Shanghai’s government may be a first step in China’s effort to build its own private equity industry as the government seeks to foster corporate governance and strengthen capital markets.

Blackstone, the world’s biggest private equity firm, will set up a 5 billion yuan ($732 million fund), marking the first partnership between a global buyout firm and the Chinese government.

The Blackstone Zhonghua Development Investment Fund will be created with the newly formed government of Pudong New Area, Blackstone said in a statement Aug. 14.“The long-term goal is Chinese private equity,” said Adam Segal, a senior fellow of China studies at the Council on Foreign Relations.

“The Chinese don’t want their industry to be dominated by Blackstone and Carlyle.”The venture is part of China’s plans to establish itself as a major player in the global economy, said Doug Guthrie, a professor of management at New York University’s Stern School of Business. During the 1980s, China was aiming to be the world’s biggest manufacturer. In the 1990s, the country was seeking partnerships with multinational companies, including financial firms.

Now they want to develop their capital markets, he said.“This has nothing to do with needing capital and everything to do with gaining the institutional know-how to do it on their own,” Guthrie said.Targeting ShanghaiThe fund will target investments in Shanghai and neighboring areas. China and Blackstone didn’t disclose the structure of the fund. Blackstone spokesman Peter Rose declined to comment beyond the statement.

Blackstone will be the first global private-equity firm to secure investment from a tier-one city government in China.The agreement signifies China’s endorsement of private equity to bolster corporate governance and profit, said Vincent Chan, co-founder of China-focused fund Spring Capital Asia Ltd. TPG, Carlyle Group and KKR & Co. haven’t established domestic funds.

via Blackstone’s Shanghai Venture May Boost Chinese Private Equity – Bloomberg.com.

Posted in China, Infrastructure Tagged: China, Infrastructure, KKR, PPP, Private Equity, Public Private Partnership, Pudong, Shanghai, Take out financing, Venture Capital

MF Assets zoom to $150 billion | Value Research

zyakaira — Mon, 10 Aug 2009 09:07:03 +0000

MF Assets zoom to Rs 7.22 Lakh Crore ($150 billion)

This is a monthly update with data from Valueresearchonline and amfiindia

This is a growth of 23.84 per cent or Rs 1.24 lakh crore ( over the assets during the end of June 2009. A closer look reveals that in June, funds went out from income and liquid schemes. But market trends made them come back again as one saw net inflows of Rs 95,764 crore ($19.95 bn) in income funds while the figures stood at Rs 24,698 crore ($5.15 bn) for liquid funds. This is being pushed largely by corporates and institutions.

Equity funds saw net inflows of only Rs 4,232 crore (<$1bn) in July. Two open-end equity schemes — Birla Sun Life Enhanced Arbitrage Fund and Reliance Infrastructure Fund garnered a total of Rs 2,394 crore or close to $498 million through their new fund offers.

Gilts had a bad month as yields ruled high at 6.97% Gold ETFs were also marginal as Rs 40 Crs inflow was reported in them

via MF Assets Set Record at Rs 7.22 Lakh Crore – Value Research: The Complete Guide to Mutual Funds.

Posted in Amitonomics, Bank Stocks, India, Investments Tagged: Asset Management, India, Investment, Mutual Funds

AIG still on the precipice?

zyakaira — Fri, 07 Aug 2009 16:15:49 +0000

AIG will soon be a domestic insurer if the planned three way split comes through to let the company return Federal funds as it has already spun off its International insurer AIA. In related news, all top four investment bankers are involved in this break up and sale of AIG.

It’s part of AIG’s master plan, known as ‘Project Destiny,’ which aims to repay a big chunk of the $82 billion in loans owed to U.S. taxpayers.

AIG is breaking off three huge subsidiaries: Its property-casualty business, recently renamed Chartis; Southeast Asian life insurer AIA; and foreign life insurance unit ALICO. Chartis was spun off last week, but its shares will be not be sold to the government.

The current scrip (closing at $22.53 yesterday) is the result of a reverse split of 1:20 preventing a penny stock tag for a stock that was ‘once the pride of the nation’. AIG also does not have a very clear corp governance record till date, making short term arrangements with Liddy and Greenberg both regularly answering charges and stepping out

In June 2009, Revenue jumped 48% to $29.53 billion.

Operating income at AIG’s general-insurance business dropped 19% on a decline in underwriting profit, while net premiums written fell the same amount. Combined ratio, or the portion of premiums paid out on claims and expenses, rose six percentage points to 98.2%.(precarious, the true income stream as it may not dabble in other income enhancing trades now)

Meanwhile, the life-insurance and retirement-services segment’s loss narrowed sharply as the company said it had a difficult but improving operating environment. The investment assets as of Q1(Mar 2009) amounted to $560 billion and even a 10% loss on these largely policy liabilities, could wipe off the company

AIG now reports a profit of $2.57 per share at $4.57 billion, taking Equity up to $58 billion

On Monday, Robert Benmosche, the former chairman and chief executive of MetLife Inc. (MET), will step in as AIG’s new chief executive, and new director Harvey Golub, formerly chief executive of American Express Co. (AXP), takes over as non-executive chairman. Edward Liddy, who took both roles in September after AIG’s first bailout, will step down.

AIG’s maximum risk on a separate book of swaps sold to European banks narrowed to $177.5 billion as of June 30, compared with $192.6 billion at the end of March. The insurer said in June that declines in the value of assets tied to the swaps could have a “material adverse effect” on results and that the risk of losses on the derivatives may last “longer than anticipated.”

This risk can still wipe out equity in the next 4 quarters unless the bad assets are separated from the conglomerate. It also has had initial hiccups in selling off its Asian businesses though it will complete a couple of sales in Taiwan life insurance in the next few days The Government holds $8 billion equity in the newly formed AIA

European Swaps

The average weighted length of the swaps protecting residential loans is more than 24 years, while the span tied to corporate loans is about 7 years, the company said.

The government’s rescue includes a $60 billion credit line, $52.5 billion to buy mortgage-linked assets owned or insured by the company, and a Treasury investment of as much as $70 billion. AIG agreed to turn over a stake of almost 80 percent as part of the initial bailout, diluting private shareholders.

AIG – which is 80% owned by the U.S. government following its rescue of the company last September – posted income of $1.82 billion, or $2.30 a share, compared with a year-earlier loss of $5.36 billion, or $41.13 a share. Excluding capital losses and other items, earnings were $2.57 a share, compared with a prior-year loss of $10.15 a share.

Data courtesy Bloomberg, WSJ and other results announcements

Posted in Financial Markets Tagged: 2009, AIG, Credit Crisis, Default Swaps, Insurance, Insurers, Life Insurance, Meltdown

Bank of England pumps extra billions | AFP

zyakaira — Thu, 06 Aug 2009 13:36:31 +0000

zyakaira notes: As markets get into their regular humdrum, such notes from Central Bankers continue to underline the cautious tone markets have acquired in 2009 and signify that the downturn will spring surprises into 2010 and more.

The Bank of England surprised markets on Thursday by agreeing to create an extra 50 billion pounds of new money even though it expected the recession to soon bottom out.

The BoE announced it would ramp up its so-called quantitative easing (QE) scheme — whereby it buys bonds from commercial institutions — from 125 billion pounds to 175 billion pounds after winning government approval.

In reaction, London stocks surged to a 2009 peak, with the FTSE 100 index of leading shares striking 4,711.51 points — the best level since October 6, 2008 — after the BoE also held interest rates at a record low 0.50 percent.

The no-change decision was in line with market expectations, but there had been considerable uncertainty about the outlook for the QE plan, which is effectively seen as creating new money.

“Financial market strains have eased and banks’ funding conditions have improved a little, although financial conditions remain fragile,” the BoE said in a statement announcing its move.

“Household and business confidence has picked up, albeit from the very low levels experienced in the wake of the financial crisis last autumn.”

The BoE had launched QE in March, when it also slashed borrowing costs to the current record-low 0.50 percent, in a bid to beat the credit crunch, boost lending and lift the economy out of a downturn.

In Frankfurt on Thursday,%

via AFP: Bank of England pumps extra billions.

Posted in Amitonomics, Bank Stocks, Financial Markets, Financial Services, GDOW, Global Tagged: BoE, Dollar, Europe, FXE, FXP, Monetary Policy, monetization, Pound Sterling, recession, TARP

State of the Insurance Market (India) | Midweek Dropzone

zyakaira — Thu, 06 Aug 2009 10:40:55 +0000

New players like Airtel and HSBC have been non-starters _TYY4 less than 10 seconds ago from web

Other players falling behind include quasi Asset management peddlers like ICICI Prudential and WL players like New York Life _TYY4 half a minute ago from web

Players like Max New York Life have designed Tech friendly products which are warehoused and delivered directly by handheld terminals for rural distribution (Vijay)

HDFC Standard Life has made losses for the first five years which the bank attributes to its up front expense accounting (IFRS subject)

Investor money seems safe because of IRDA regulation in the area despite global cues for AIG, Aviva and metlife

LIC held 40% share in the new business in 2007 and 56% in 2009 _TYY42 minutes ago from web

Life Insurance Corpn alone holds a book of $64 billion in investments including double digit figures in unclaimed funds _TYY43 minutes ago from web

Additionally, 6 pvt Pension fund managers are mandated to run state owned and independent pension funds _TYY46 minutes ago from HootSuite

16 private players in Life and 11 in non life _TYY46 minutes ago from HootSuite

Motor and Health makes 50-60% of the non-life Insurance segment _TYY47 minutes ago from HootSuite

Insurance in India had last grown to $41 billion in 2007, Life marking $36 b7 minutes ago from HootSuite

Indian Insurance: Bajaj Allianz, Metlife and Aviva safe in India till now _TYY412 minutes ago from HootSuite

The Foreign partner can bring up to 49%? Insurance Reform stuck in the middle _TYY413 minutes ago from HootSuite

AIG wants to sell off Indian Life Insurance stake – We’re safe with IRDA watching _TYY415 minutes ago from HootSuite

RT @zyakaira: Indian Insurance Market: DLF to get out of Insurance when buyer is available- AIG, Prudential turned down _TYY418 minutes ago from Plaxo Pulse

AIG wants to sell off Indian Life Insurance stake – We’re safe with IRDA watching18 minutes ago from HootSuite

Indian Insurance Market: DLF to get out of Insurance when buyer is available- AIG, Prudential turned down _TYY421 minutes ago from HootSuite

Apna Bharat Mahaan – More India Trends:: Swine Flue catches Twitter http://tr.im/vIg0about 1 hour ago from TweetDeck

RT @mashable TWITTER PURGE: Top Twitter User Unfollows 106,000 People http://bit.ly/3IMizabout 1 hour ago from TweetMeme

Trends in apna bharat mahan – It happens for Twitterindia Bank strike – Twitter Search http://ow.ly/jfp1about 2 hours ago from HootSuite

Trends in “Apna Bharat Mahaan” Twitterindia speaks for Inflation down – Twitter Search http://ow.ly/jfoJ (DON’T TOUCH BIT.LY) about 2 hours ago from HootSuite

I think someone shd check the bit.ly bug: they don’t shorten the complete url on search.twitter about 2 hours ago from HootSuite

Last but not the least Twitter India speaks on the RIL RNRL gas dispute http://ow.ly/jfnJ about 2 hours ago from HootSuite

Depression has changed a few facts in Insurance

New players like Reliance and old alike like LIC and ICICI Prudential, Axis planning IPOs ( rules require 10 yrs of Operations) _TYY4 less than 10 seconds ago from web

Reliance Life will be looking for a Reliance Capital IPO as Insurance has only 5 years of Operations

New players like Airtel have been non-starters _TYY4 3 minutes ago from web

Other players falling behind include quasi Asset management peddlers like ICICI Prudential and WL players like New York Life _TYY4 4 minutes ago from web

LIC held 40% share in the new business in 2007 and 56% in 2009 _TYY4 5 minutes ago from web

Shikha Sharma has joined Axis Bank as MD and ICICI wants a unified holding company alongwith SBI to manage as part of the bank!!

Posted in Bank Stocks, Financial Markets, India, India Infrastructure, Investments Tagged: AIG, Airtel, Amitonomics, Aviva, DLF, Dropzone, Financial Markets, Global investing, HDFC SL, ICICI, India, Indian Economy, Indian Stocks, Insurance, Life Insurance, Max, Max Vijay, Metlife, Micro blog, Midweek, Midweek Dropzone, New York Life, social justice, Standard Life, Tweet blogging

The first tweets ‘after’ the crisis – Aug 05, 2009

zyakaira — Wed, 05 Aug 2009 03:54:13 +0000

Up and Hangover are still competing with Harry Potter after 2 months with $300m each1 minute ago from HootSuite
MMRDA’s prior land deals with Jet airways and Starlite have however been canceled as both could not pay up _TYY42 minutes ago from HootSuite
MMRDA-Mumbai Urban Infra Plan received an addl $320 m from the state incl Bhiwandi-Dombivili-Mumbra, Vasai-Virar & Mira-Bhayendar roads_TYY44 minutes ago from HootSuite
Mumbai has also planned 3000 million ltr water projects for $1b with the Konkan Irrigation Dev Corp _TYY48 minutes ago from HootSuite
Meanwhile, MMRDA has awarded the Mumbai Metro Phase 2 to Reliance Infrastructure (Anil Ambani) for around $2.3 billion11 minutes ago from HootSuite
Axis Bank plans to raise 71.4 m new shares or an addl 20% of its capital to boost Tier1 ratio, with SUUTI unlikely to subscribe more_TYY413 minutes ago from HootSuite
Overseas contribution for Love Aajkal was a healthy $3 m across Pakistan, UK and Oz _TYY416 minutes ago from HootSuite
Saif’s Love Aajkal grossed Rs 62 crore ( $13 m) on the opening weekend, a hefty figure for Indian Rupee denominated tickets. _TYY416 minutes ago from HootSuite
Multiplex revival boosted July figures and mall footfalls are up 50% from a y-o-y drop of 20% and more in the first half _TYY420 minutes ago from HootSuite
Cognizant manages 94% repeat business from existing customers, Indian outsourcing business wd corrrespondingly stay at $50 billion _TYY422 minutes ago from HootSuite
Cognizant maintained a Q-o-Q revenue increase of 3% to $776 million and operating margins increased with rise in attrition to 11.3% _TYY424 minutes ago from HootSuite
As GE business continues to fall at Genpact, it admitted slower growth could mar its prospects _TYY427 minutes ago from HootSuite
Today on advantages: HSBC and Barclays ride out global storm – FT.Com Banks: Both Bar.. http://tr.im/vvOe 28 minutes ago from Plaxo Pulse
Today on advantages: UBS Posts $1.3 Billion Quarterly Loss – NYTimes.com: UBS posted a.. http://tr.im/vvOh 28 minutes ago from Plaxo Pulse
Today on advantages: ANZ to buy RBS Asian assets for $550m | FT.com Banks: ANZ will buy Roya.. http://tr.im/vsff 28 minutes ago from Plaxo Pulse
Genpact and Cognizant reported optimistic earnings with $29.7 m (up 20%) and $141.3 million ( up 36%) respectively _TYY428 minutes ago from HootSuite
The NMDC sale could fetch the govt more than $2.5 billion _TYY433 minutes ago from HootSuite
Following on after the NHPC issue of $1.3 b and OIL’s $1b in September, REC to open in March 2010 for $.75 billion _TYY434 minutes ago from HootSuite
As deposit rates hit southward, Axis gets ready to woo customers with new Mutual Fund and Insurance ventures by October _TYY436 minutes ago from HootSuite
Will Axis be able to compete with Citi, HSBC and Stanchart in India? _TYY438 minutes ago from HootSuite
Stanchart can manage its relationship with RBI and the inclusive growth agenda. India contributed 19% to Stanchart profits _TYY440 minutes ago from HootSuite
RBS has not planned a sale of the wealth management team and still wants to be rid of the liabilities’ book _TYY442 minutes ago from HootSuite
Stanchart is unlikely to however bid for all Indian branches of RBS while RBS planned an exit from all India business in consumer and retail43 minutes ago from HootSuite
Stanchart’s India operations have reported $526 m in operating profits with a $94 m increase in impairments44 minutes ago from HootSuite
ANZ is unlikely to be of significant size to bother HSBC, Citi and Stanchart in Asiaabout 1 hour ago from HootSuite
ANZ has grabbed RBS business worth $3.2 b in loans and $7.1 b in depositsabout 1 hour ago from HootSuite
Stanchart will get RBS in India and China for a couple of $100 million, but like others has frozen personal lines in the area _TYY4about 1 hour ago from HootSuite
In Banking stocks, Axis hope to raise $1 b from the market, but some of its promoters are unlikely to have ore resources _TYY4about 1 hour ago from HootSuite
Harry Potter is growing strongly to $220 million in 2 weeksabout 1 hour ago from HootSuite
@blrmoneytalkz : Should You Invest In Mortgage-Backed Securities? – WSJ.com: ZYAKAIRA(AMIT.. http://bit.ly/3tJYR4

BOTTOMLINE: Outsourcing in trouble, Infrastructure hungry for Ca$h, Retail Lifestyle businesses up on the move, Asian Banks will remain gems in the global portfolio and lots of IPOs

@blrmoneytalkz

BOTTOMLINE: Invest in Axis Bank, exit RBS, sell the casino banks and sit and enjoy annuity income _TYY4less than 20 seconds ago from TweetDeck
BOTTOMLINE: Asian Banks will remain gems in the global portfolio and lots of IPOs _TYY41 minute ago from TweetDeck
BOTTOMLINE: Outsourcing in trouble, Infrastructure hungry for Ca$h, Retail Lifestyle businesses up on the move _TYY41 minute ago from TweetDeck

Amit Mittal
amittal92@gmail.com
MD, Advantage Research Pvt Ltd
@Innovative Film City, Bidadi 562109
On the web Advantage ‘zyaada’ http://advantages.us/zya

http://astore.amazon.com/mmmzyaada-20

Posted in Financial Markets

UBS Posts $1.3 Billion Quarterly Loss – NYTimes.com

zyakaira — Tue, 04 Aug 2009 17:04:17 +0000

UBS posted a $1.3 billion quarterly loss on Tuesday, the third in a row for Switzerland’s biggest bank, and blamed costs linked to its reorganization program.The loss widened to 1.4 billion Swiss francs in the second quarter from 395 million francs in the same period a year earlier. The company cited costs related to job cuts and charges to improve the bank’s debt position, and it said clients continued to withdraw money from its wealth management units even though the rate of net outflows slowed from the first quarter.The bank gave a bleak outlook, saying that a sustainable economic “recovery is not yet visible.”“Our outlook remains cautious, consistent with our view that economic recovery will be constrained by low credit creation and the structural weaknesses in consumers’ and governments’ balance sheets,” the bank said in a statement.Oswald Grübel, the bank’s chief executive, has cut about 7,500 jobs, reduced risk-weighted assets and sold a unit in Brazil in an effort to return the company to profitability. Credit Suisse and other UBS rivals have recently reported higher earnings as strong performances of their investment banking units outweighed rising bad loans at their retail operations. At UBS, the investment banking business had a pretax loss of 1.85 billion francs, down from 5.24 billion francs a year ago.

via UBS Posts $1.3 Billion Quarterly Loss – NYTimes.com.

Also, another 16.5 billion CHF have flown from the bank and the legal battles with US may be closed soon. But $UBS is not bankable anymore

Posted in Bank Stocks Tagged: Bank Stocks, Banking, Credit Crisis, Depression