A Prize I Won’t Be Winning

October 26, 2011

A buddy just sent me a link to a BBC story about the youngish owner of a British retail firm offering a £250,000 prize for the best plan to manage one or more countries abandoning the euro currency.

The market took the small hit from this stunt on top of the more seriously negative announcement that the finance ministers of the Euro zone have effectively kicked their problem upstairs by cancelling their 27-hand poker game and letting the unlimited stakes table (the Presidents and Prime Ministers) deal with it.

My reaction (as is often the case) ran counter to most of what I read or hear in the financial press. Read the rest of this entry »


The Second Cold War

October 13, 2011

I recently saw a piece quoting Chinese officials as saying global warming concerns were an American plot created to make economic war on China.  Except to a few anti-science politicians here in the States (unfortunately at the national level), it seems like a pretty farfetched, even paranoid, idea.

But what if they are right?  What if, as one Presidential candidate suggested in the economic policy debate this week, America is making economic war on China?

After all, the past twenty years have seen otherwise reasonable people buy into the fairy tale that a non-existent system that was a gigantic waste of money from the 1980’s is how we “won” the first cold war. Read the rest of this entry »

When Certainty Isn’t Enough

October 12, 2011

In a phone conversation today about my recent rhetorical question asking “Who Plays AIG in the Sequel?” I was moved to explain about the problem with a network of counterparties, none of whom is disclosing who they trade with.

It even has a name — Herstatt Risk.  Amazingly enough, Germany’s 35th largest bank (in 1974) had enough unsettled US Dollar – German Deutschmark currency exposure when it was shut down to take down several larger banks.  In a sense, that’s what happened again in 2008, and is somewhat likely to happen this year or next.

. Read the rest of this entry »

amREIT Agita

October 10, 2011

In the big Friday lead-up to America’s most politically incorrect semi-holiday (Columbus Day), I received a link to one of Jody Shenn’s articles on Bloomberg with a reasonable question:

“Does the increase in early prepayment have any role to play in the recent amREIT decline?”

So now that I’ve survived the heat of a weekend that should have been a brisk leaf-peeping delight here in New England, let me reflect on some of the data in Jody’s article. Read the rest of this entry »

E Pluribus Corporatum

October 10, 2011

I have my nomination for the highest return investment of the past three years — the hundreds of millions the financial industry spent on lobbyists who take their percentage and then pass lots of it along in heavily string-attached political contributions.

The fascinating part of this whole game is how the game itself derails any attempt to reform it.  By the way, the corruption-maintenance by the system only partially includes the nightly fund-raising cocktail parties in Washington where the standard lobbyist contribution is $5,000.  Read the rest of this entry »

amREIT Nirvana Update

October 4, 2011

Today I received a note from Merrill Ross at Wunderlich pointing out the likely reason for the current deep discounts in the mREIT sector.  It’s especially strange that the “pure” amREITs have gotten whacked so hard while the underlying portfolios have increased in value.  There’s no prospect of an inverted yield curve (poison to the spread carry maturity mismatch business model).

From Merrill’s note today:

” There is no crisis more capable of inflicting damage than a liquidity crisis. We believe that the central banks stand ready to manage the potential of sovereign default, and that the banking system will not grind to a halt. We believe there is some potential for disruption, but limited potential for counterparty risk to result in permanent equity erosion among the mortgage REITs. For investors with a risk tolerance, today’s pricing levels represent an opportunity. Never before in history have the mortgage REITs traded at a discount to book value when the curve was positively sloped, and if this liquidity risk is more of a fear than a reality, there could be significant price recovery from current levels”

I’ve got join her in guessing that investors are selling their mREIT and amREIT stocks through fear that the domino theory of chained insolvency will hit repo providers who finance the Agency MBS in the amREIT portfolios.

Read the rest of this entry »

Blog to Bookmark

October 2, 2011

Tomorrow is the first Monday in October.

That means we have to get ready for more new laws from the most radical Supreme Court in a century.  I remember well calling my buddy George when the Citizen’s United case was given a “do over” with a broad hint that the corporate plaintiffs should ask for more than they did in the first hearing.

Since when does any lawyer ask for too little in their pleadings?  When even the loawyers know that the Constitution would be stretched to the breaking point if they asked for more, that’s when.  But the Roberts court was in a mood to make sure human citizens have no rights at all compared to the non-human (and often non-American) corporate golems that five members of that court want to crown as permanent dictators over humanity.

For that reason, I’m going to begin my daily visit to Scotusblog, and put it onto the blogroll of links in the right hand column.  Those five jurists can change our lives, forever, and they don’t have to worry about annoying elections or citizens when they decide to keep shredding our hundreds of years of Constitutional democracy to maximize profits for their owners.

It will be worth checking on them every day.

They can be impeached (hint, hint).