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John Mauldin's Latest Commentary Replies |
rffrydr
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 Posted: Wed Nov 07, 2007 1:44 am Post subject: |
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Some bullish rumblings in this week's note--in of all places, structured finance. Large Cap CLOs...with implications.
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HenryTo
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| Posted: Sat Nov 03, 2007 11:21 am Post subject: |
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Argues in this week's commentary that the Fed will no doubt continue to slash rates (to below 4%), given rising foreclosures and given that the Alt-A resets haven't even hit the markets yet. Also discusses the birth-death ratio in the latest employment survey, with a special emphasis on the financial and construction industry (similar to what Jim Rogers mentioned in his Bloomberg interview yesterday):
http://www.2000wave.com/article.asp?id=mwo110207 |
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HenryTo
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rffrydr
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| Posted: Sun Oct 21, 2007 6:49 am Post subject: |
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For the lightly leveraged the answer is insurance:
| Quote: | MARKETS AND INVESTING: Debt-starved SIV sector takes notes as Cairn Capital shows how to restructure
Financial Times
Published: Sep 07, 2007
Fresh warnings over some off-balance sheet investment vehicles run by banks and asset managers this week suggest the sector still faces significant risk.
The actions by ratings agency Moody's and its peers even prompted Citigroup, the granddaddy of the structured investment vehicle (SIV) world, to issue a series of statements about the creditworthiness of the more than $100bn of assets in its seven vehicles and their continued ability to raise funding.
But as the market for the short-term debt that funds much of the activity ofSIVs, and their near-cousinsSIV-lites, remains at best very expensive, and at worst inaccessible, many managers will be taking a detailed look at how a recent restructuring was achieved by one manager, Cairn Capital, in London.
It emerged yesterday evening that one of the first such vehicles to hit the buffers, Mainsail II, run by London-based Solent Capital, could be close to a deal.
The problems for these vehicles and the conduits run by many banks have two sources. They have been hurt as funding in short-term debt markets has seized up. Simultaneously, values for the assets they hold have fallen as investors deserted all asset-backed bonds in response to fearsof contagion from theUS subprime mortgagemarkets.
Analysts at Moody's said during an investor call on Tuesday that the funding problem was by far the most serious for most vehicles.
"The ongoing liquidity crisis has deepened and broadened since . . . July," said Paul Kerlogue, senior credit officer for SIVs at the agency. "Vehicles that fund [by means of] the issuance of commercial paper have found financing either impossible or achievable only at exorbitant levels."
For Cairn Capital, it was funding difficulties that hurt its $1.5bn SIV-lite, which is similar to a SIV, but has more junior debt - or less leverage - and invests exclusively in mortgage-backed bonds and collateralised debt obligations.
Its assets remain all AAA rated and any value decline it has experienced has not been enough to force a sell-off such as that taking place at Solent's $1.3bn vehicle, Golden Key, run by Avendis of Switzerland.
Managers of all such vehicles had seen the costs of their short-term funding beginning to rise since about mid-July, but none foresaw the rapidity of the deterioration in asset-backed commercial paper in August.
Cairn explored several options with different investors as to how it might replace its short-term funding in a worst-case scenario.
It is thought that Barclays Capital was supposed to provide liquidity for about 25 per cent of the senior debt, as with the three other SIV-lites it had arranged - Solent's, Avendis's and one for Sachsen LB, the troubled German bank.
But eventually Cairnmanaged to organise a deal whereby Barclays increased this to 75 per cent, while Danske Bank of Denmark came in to fund the rest.
The banks said the deal was done on commercial terms. It is understood that while they are providing the funding as the short-term senior debt comes due, they have managed to offload the credit risk of the assets after investors in the junior debt agreed to pay a third party for credit default protection.
All this means junior debt holders in the Cairn SIV will receive lower coupons than they were originally promised, but instead they will be given a greater share of any residual cash flows - or profits - from the assets.
The vehicle can no longer increase in size, or buy new assets, as its current holdings mature - but crucially it will not be forced toliquidate its portfolio in a rush.
Moody's said this week that SIVs run by banks were likely to have more options for support than those run by independent managers.
"Banks have reputations to protect in business and political interests far removed from the world of SIVs, and the blow to a bank's reputation that may be occasioned by a failure of a SIV may be more than the bank can tolerate," the agency said.
However, banks may have so-called soft reasons to support the vehicles they have arranged as well as those they run.
For example, hedge funds that run SIV-lites are often important clients because of the amount of other business they provide by their frequent trading.
There may be investors in vehicles that banks have arranged that are also important clients of the bank in other areas, making it politically important they do not suffer losses.
Barclays has now proposed a deal for Solent's vehicle, which involves the bank paying back all senior investors at par and underwriting new senior debt.
Junior note investors will be invited to fund a lower ranking slice of this new debt, improving Barclays' protection against losses.
Solent's SIV-lite is thought to have been forced to sell about 25 per cent of its portfolio - roughly $326m - after it was unable to draw onits liquidity facility from Barclays not long ago.
But the real question is whether such deals canbe done for the much larger, more highly leveraged SIVs.
The $6.6bn Cheyne Finance, the first SIV to encounter trouble, is thought to be looking at a number of options, while the $11bn-plus Axon Financial Funding is another company talking to potential lenders.
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HenryTo
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HenryTo
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| Posted: Sat Oct 13, 2007 1:16 pm Post subject: |
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John Mauldin breaks down the latest GDP growth numbers and argues for why the US economy "only" experienced a short recession during 2001 to 2002:
http://www.2000wave.com/article.asp?id=mwo101207 |
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HenryTo
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| Posted: Sat Oct 06, 2007 11:26 am Post subject: |
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John Mauldin on the latest payroll numbers, the probability of a recession, as well as a continued discussion on the housing market - and disputes the effectiveness of a potential "bailout" of subprime borrowers:
http://www.frontlinethoughts.com/article.asp?id=mwo100507 |
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HenryTo
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| Posted: Sat Sep 29, 2007 11:59 pm Post subject: |
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| At this point, he is hedging his bets. A very simplified "analysis," given that there are so many interconnections between the sectors and between the different countries. Again, if Europe slows down dramatically as well, then the "globalization impact" will not be so benign. |
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rffrydr
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| Posted: Sat Sep 29, 2007 10:28 pm Post subject: |
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"Breaking down" the index while embracing the world has led to a new twist on an old bear--the Mauldin bull.
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HenryTo
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