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Where the rubber meets the road: credit availability in corporate America
Posted by Tim Hope on 10/2/08 11:05 am
The hidden underbelly of the current credit squeeze does not necessarily show up as a flashing number on the TV news. Rather, the lack of routine credit availability is impacting corporate America in an insidious viral manner. Some firms are cutting their dividend payments while others are tapping credit lines while they are still available. Other firms are closing plants, stores and delaying previously negotiated takeover deals in an effort to conserve cash that continue to be difficult to get. Such actions are yet another indication of the real impacts of the frozen state of the credit markets. Click here to read more.
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The “Man Behind the Curtain”
Posted by Tim Hope on 9/24/08 10:47 am
Everyone must be familiar with the scene from the Wizard of Oz when the wizard is finally discovered behind the curtain only for him to proclaim “pay no attention to that man behind the curtain.” The current financial crisis has at its root a “man behind the curtain” in the form of the major rating agencies. There are reports that the firms substituted theoretical mathematical assumptions for the opinions of their own analysts in a rush to grade issues for fee income. The result was that securities with coveted AAA ratings were packaged up and sold into the marketplace throughout the world despite the fact that they contain securities that were anything but top rated. Between 2002 and 2007, rating agencies pumped out top flight ratings on roughly $3.2 TRILLION of mortgage debt pools even though they contained mortgages from homeowners with damaged credit and undocumented incomes. Without the AAA rating the securities would not have been available for purchase by banks, insurance companies and pension plans. As subprime borrowers have defaulted many of the securities have been downgraded and fallen in value and in some cases written off entirely (or close to it). While the Wizard of Oz had a happy ending, it remains to be seen how the present story will unfold. Click here for an excellent article on the topic .
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Buffett Investing $5B in Goldman Sachs
Posted by Patrick O'Connor on 9/23/08 2:43 pm
Financial stocks are rebounding in aftermarket trading after Warren Buffett announced that Berkshire Hathaway will purchase $5 billion worth of preferred Goldman shares and receive warrants to buy another $5 billion worth of common shares at $115 per share. Read More.
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Money Squeeze Rippling Beyond the Headlines
Posted by Tim Hope on 9/22/08 11:44 am
Franchisees of a major worldwide fast food chain are experiencing difficulty obtaining financing for routine business improvements through their usual lender, a major money center bank. The problem is so acute that some franchisees are being encouraged to locate other sources of lending themselves. This is a surprising development given that such borrowing would seem to be the bread and butter of any lender. Click here to read the whole story.
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Tight Credit Market Driving Up Corporate Financing Costs
Posted by Tim Hope on 9/18/08 10:07 am
For the week ending September 17th, the U.S. commercial paper market has shrunk by 4.2% the largest such decline in 26 years. Commercial paper is a major source of short term corporate financing. The tightening credit conditions can clearly be seen in the increased borrowing costs for corporations. Consider that overnight rates on commercial paper increased by 1.38 percentage points this week for a rate of 3.46%. The 30 day rate has moved 73 basis points higher to a rate of 3.1% (each percentage point represents 100 basis points). While at the same time, three month Treasury bill yields have fallen to levels not seen in half a century. In light of some money market funds that are struggling to maintain their one dollar NAV, such an increase in commercial paper rates can be seen as yet another signal that market participants lack confidence in anything but direct obligations of the US government. Click here to read more
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Another Volatile Session on Wall Street
Posted by Patrick O'Connor on 9/16/08 1:58 pm
AIG is still scrambling for cash and the Fed surprised some investors by keeping interest rates unchanged. As a result, today’s trading session bounced in and out of positive and negative territory 25 times.
Legal hurdles could prevent Fed from putting AIG into conservatorship
Morgan Stanley announces solid earnings
Goldman Sachs announces weaker than expected earnings
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Lehman Goes Bankrupt, Merrill Sold, AIG Desperate for Cash
Posted by Patrick O'Connor on 9/15/08 10:57 am
A wild weekend of deal making on Wall Street changed the financial landscape by historic proportions. Lehman Brothers could not raise capital to survive, Merrill Lynch read the writing on the wall and decided to sell itself to Bank of America before suffering a similar fate, and AIG is still in scramble mode to raise capital and avoid bankruptcy.
Lehman Brokerage Accounts Transferred to Other Firms
Merrill Lynch Sold to Bank of America
NY Allows AIG to Borrow from Subsidiaries
Some Economists Think Fed Will Cut Rates Tomorrow
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Lehman Shares Plummet on Capital Fears
Posted by Patrick O'Connor on 9/9/08 9:56 am
Shares of Lehman Brothers tanked today after rumors said the country’s fouth-largest investment bank was no longer discussing a deal with Korea Development Bank. Investors fear Lehman will not be able to raise capital, to survive, as a result. Read More.
Lehman talking to other investors...
Royal Bank of Canada not interested...
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U.S. Treasury Bails Out Fannie and Freddie
Posted by Patrick O'Connor on 9/8/08 11:43 am
The U.S. Treasury on Sunday moved swiftly to backstop the burgeoning credit crisis by seizing mortgage giants Fannie and Freddie. Read full reports from several sources at the Navellier All Cap Blog.
Read Timeline from The New York Times
Fannie, Freddie and You: What It Means to the Public
By Ron Lieber, The New York Times
Mortgage Bonds Backed by Fanny & Freddie Rally
Bloomberg
Mortgage bonds guaranteed by Fannie Mae and Freddie Mac rallied, potentially reducing home-loan rates, after the U.S. government seized control of the companies and vowed to shore up demand. Read More.
Dollar Rises to Nearly One-Year High
Bloomberg
The dollar rose to the highest level since October against the euro as the U.S. government's takeover of Fannie Mae and Freddie Mac boosted confidence in financial markets in the world's largest economy. Read More.
Fed Officials Considering Credit Card and Auto Loan Regulation
The Wall Street Journal
While the government takeover of Fannie Mae and Freddie Mac represents the most powerful federal intervention in financial markets in decades, there are likely to be further government moves ahead. Read More.
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Fed Report Shows Economy Slowing
Posted by Patrick O'Connor on 9/3/08 12:52 pm
Nearly all 12 Fed districts across the nation reported signs of a slowing economy in the Beige Book report.
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Blogs found at this site are sponsored blogs created or supported by Navellier & Associates, Inc. For questions about any Navellier blog, please contact Patrick O’Connor, .
The views and opinions expressed on this blog are purely the blog owners, and not necessarily those of Navellier & Associates, Inc. If we claim or appear to be experts on a certain topic or non-Navellier product or service area, we will only endorse such products or services that we believe, based on our expertise, are worthy of such endorsement. Any non-Navellier product claim, statistic, quote or other representation about a product or service should be verified with the manufacturer or provider.
Navellier & Associates, Inc., seeks to retain the freedom of expression of its blog owners. However, Navellier & Associates, Inc., is a registered investment advisor and is in the business of selling investment advice. This creates inherent conflicts of interest insofar as our blogs are partly designed to promote our own investment advice, services, products, and strategies. In that regard, Navellier blogs do contain content which present conflicts of interest.
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