Pj568

Who Owns the Derivatives Market?

Open Questions:

Is it correct that the problems are only (mainly) in the naked CDS positions ?

If CDS accounts for 15% of the total derivative contracts then that is the maximum naked positions on a notional basis. What then is the net positions? If unknown then what is the estimated net?

Since this has been prime news since 2007 what has been the progress,if any, by the fed or accountants in ascertaining net positions, recognition of losses and making adequate disclosure?

Citigroup: Levitate Above the Frenzy

Rational reasons for the quoted 22% short position:

1) Future losses expected
2) Current dilution not fully recognized
3) Further dilution expected
3) No transparency in the sector
4) Institutional and national deleveraging still occurring
5) Insolvency
6) Financial crisis is not over
7) Still in a recession

Bank Stress Tests: Tangible Common Equity a Critical Metric

We know government is not the brightest nor leading edge when it comes to financial analysis.

My question is where have all the experts, banks execs and other corporate gurus been to have ignored this. Are there really any true experts in our corporate suites?

Sadly to say, the mega banks didn't want to cut common dividends until the Feds forced them.

This whole thing is just pathetic.

Wall Street Breakfast: Must-Know News

Boston Scientific (BSX): Q1 EPS of $0.19 beats by $0.07. Revenue of $2.0B (-1.8%) in-line. (PR)

Don't you just hate it when the GAAP loss gets in the way of those good profit numbers?

Big Debt and Big Returns Could Be Spurring This Rally

It will be difficult for any financial services company to return to prior levels just due to the change in basic fundamentals underway. Several have had to: issue additional stock, are decreasing their own leverage ratio's, decreasing leverage of their customers and eliminated dividends. That's a big load to overcome with their history of settling for ROA's of less than a percent.

FASB Unlikely to Suspend Mark to Market

FYI - the discounted cash flow of many of these CDO's were originally computed with assumptions which are signifcantly different today than when originated.

We now know that home values are down 50%, not growing 3% for eternity; default rates have quadrupled to 5% and increasing; they assumed borrower income was real as opposed to being fabricated; they assumed that the security had legal title to the mortgages which appears to be a misnomer; early payoffs were severely underestimated and who knows what else they missed. These items are permanent and can't be recaptured in future cash flows.

In other words the discounted cash flow value might not be that far off from the "market value".

Surely the bankers are not asking to use the original assumptions (historical value)or are they? They have yet to tell us how much what their current estimate of value is and how much it actually varies from the current market value.

Don't Blame Mark-to-Market for This Crisis

MTM is part of what the hedge fund staffs have done for years in ascertaining company value. Now that MTM numbers are available to the common investor as part of company reporting, why do away with our free access?

Are U.S. Banks Really Worthless?

If the hedge funds and billionaires of the world aren't buying this argument then I'm not either.

Financial Stocks: Playing the Mark-to-Market Suspension

Mark to Market isn't going away. It came about due to the investor community representation on the FASB board. It helps align GAAP with international accounting standards. The US system has been moving for more transparency for decades. Country regulators may decide to change their standards for regulatory purposes but to disregard the investor community would be self defeating.

The Paulson Plan: Compelling Banks to Lend at Bazooka Point

Isn't WFC on record saying they were going to raise 20B in new capital to support the Wachovia 7B stock acquisition? This seems cheaper and less dilutive than what their other options were.

Lehman: Delevering Risk High, and Growing

Selling assets doesn't raise capital unless a gain is recognized. It should increase cash in most instances. Raising capital is a useless term anyway as capital can be either debt or equity. All these guys need more equity and not more debt. Unless these inv banks reduce liabilities at a 25 to 1 ratio over equity they haven't delevered either, they've only become smaller. To actually delever they have to sell assets, recognize gains, reduce liabilities and increase equity which is an impossibility in this market without severely diluting the current equity holders. Some of these firms have little chance of survival as any recoveries are forecast to be at least a year away at best.

Citigroup 1st Quarter Update, As Promised

Spreadsheets can be dangerous. Wonder what those 15 analysts that reflect a 2008 average and high eps of .50 and 1.10 are missing. Their 2009 average and high estimates are 2.85 and 3.50. With 5.25B shares currently outstanding, that results in an 2009 dollar range of 15B to 18B. (estimates as shown in Yahoo). To say that an 08 range of 20B to 31B is possible makes one wonder doesn't it?

Are Mega Funds Making Trigger-Happy Investing Decisions?

Intriguing question. Some deals have been previously questioned, but not all of them.

Is it possible the only investment with an adequate margin of safety made during the last six months is the JPM/BSC/FED deal?

UBS Plan Could Be the Road Map for Financials

Itsjustme,

Agree that the article doesn't work by itself.

If you obtain liquidity and liquidity is 80% of solvency. If you can limit ongoing losses, rely on current profit producing areas, you've increased your ability to sell the preferred you have to issue.

UBS Plan Could Be the Road Map for Financials

It works if they move "quality" illiquid assets and take it public, it can't be just a dumping ground for "toxic waste". Newco must have the ability to hold to maturity (concerned with credit not market risk), make sure they receive the current illiquidity discounts in place. Maybe its formed to receive assets from three or more banks. Newco has to be the real deal, capable of turning profits.

It benefits the banks by receiving cash (the IPO) and not further depressing prices by flooding the market with additional selling pressure. If they expect continued illiquidity for the next several years, they also avoid future write downs.

If they're thinking long-term, it could work for both the banks and the Newcos.