SIVs and sub-prime explained – by John Bird and John Fortune.

This is a link to a recent sketch between John Bird and John Fortune on ITV’s ‘The South Bank Show‘. They discuss in brilliant satirical style the problems we have seen in the financial markets in the last few months. At the time of writing, the clip has been viewed by almost a quarter of a million people (and judging by the comments, many of these viewers are from the US).

 

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Now we know how much &#39AAA&#39 rated CDOs are really worth

Carina Ltd, a CDO managed by State Street, is being liquidated after the credit quality of its collateral fell below predetermined levels, allowing senior note holders to force a fire-sale of assets. Carina was originally a $1.5bn CDO when it was launched in September 2006, and is the first CDO to begin unwinding since the credit crunch began. The rating on an AAA rated portion of the CDO was d…

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It don&#39t matter if you&#39re black or white?

We’ve written a lot about the US sub-prime crisis and some of the very nasty housing stats coming out of the US, but sometimes it takes ‘real life’ examples to realise just how bad the situation has become for US homeowners, and how much worse it can get. There was an excellent piece on the BBC website earlier this week, which focused on Cleveland, Ohio – "the sub-prime capital of the United St…

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The "Level Three" dustbin – hazardous waste? Not to be opened until reporting season is over.

Third hand, through the blog-o-sphere, here are a few little ratios (click to see) that might make you think that the market’s current whipping boys, Merrills and Citigroup, have been relatively conservative in their exposure to the problem asset classes (CDOs, loans, SIVs etc). Somebody has calculated the extent that the US investment banks have categorised these instruments as “Level Three” f…

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Model portfolio

Brazilian supermodel Gisele Bundchen, the world’s richest model according to Forbes magazine, shares our view that the dollar’s yet to bottom out. She is insisting upon being paid in pretty much any currency other than the dollar.

According to Veja, Brazil’s biggest weekly magazine, Gisele demanded to be paid in euros when she signed a contract in August to represent Pantene hair products for …

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The Fed&#39s Halloween Cut – Trick or Treat?

The Fed gave markets a treat by cutting rates by 0.25% yesterday, taking rates to 4.5%. The nasty trick, though, was that the Fed said that the upside risks to inflation balances the downside risks to growth. Monetary policy is ‘neutral’, ie there is (supposedly) an equal chance of the next rate move being upwards as downwards. I say ‘supposedly’, because yesterday’s Fed cut coincided with the …

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MLEC: &#39initial&#39 thoughts

The big investment banks (led by Citigroup) have clubbed together to create a colossal $75bn SIV (Structured Investment Vehicle), which the banks hope will help solve many of their problems. The fund has been set up so that banks can pool and price bank debt, as well as CDOs, CLOs, residential mortgage backed securities (and anything else they can chuck in) that they’ve had problems selling and…

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Lies, Damn Lies, and Argentinian Inflation Statistics

It turns out that the Argentinian President may well have been fiddling the nation’s inflation numbers (see this Bloomberg article). As a result it’s estimated that holders of Argentian inflation-linked bonds have lost $250 million in interest payments, and the bond prices have fallen by 24% this year. Merrill Lynch reckons that inflation is actually rising at 17% per year, twice the published …

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Northern Lights

Another day, another trip by Northern Rock’s treasurers down to the City by GNER (presumably first class), in order to load the briefcases up with cash from the Bank of England’s vault. All in an effort to keep the Northern Rock lights on. This time Northern Rock borrowed £4.7bn, and the running total is now over £20bn. Try putting £20,000,000,000 into a basic calculator – they were not designe…
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