Daniel Jones

Should the Fed Lend to Investment Banks?

I for one have an opinion that the TSLF was a tremendous opening of a spigot to reliquidate the entire balance sheet of the I-Bank industry to the tune of $300 billion. Footing the bill, the US Taxpayer. Enjoy your economic stimulus checks of $1,200 or whatever - Wall Street got one for $3 bills courtesy of HP at the Treasury.

GSEs: The Tail Wagging the Credit Market Dog?

What's the worst-case scenario if the book values continue to erode? JP Morgan can't come in and buy FRE or FNM for $10 a share...these two will have to access the capital markets and pay up for that capital. That usually means a dilutive event for present shareholders. Does the present market price reflect this potential?

I like your analysis of the historical price / book. Are there other, smaller regional players in the banking sector that represent compelling price / book opportunities?

Rogue Traders and Economic Capital

"While the magnitude of the SG loss is remarkable - even incredible -- such events are increasing in frequency among large banks, in part because the financial instruments prevalent in the markets today enable and encourage this type of behavior"

I absolutely agree with that observation, Chris. The gun-slinging traders are in a heads-I-win, tails-the-bank-losses type of arrangement. They are incentivized to be as aggressive as possible. The "hedged" nature of a trade setting up one commodity vs. an equity index based upon correlations that have held up in the past is questionable at best. Nothing says both positions can't tank at the same time, or that risk premia can't act irrationally longer than the traders can remain solvent. (apologies to Keynes for butchering his quote).

While many will point to in-house risk management teams doing their jobs, there could be a strong need for a discussion on how to rein in some of the trading desks and hedge fund risk takers as well, in my opinion.

Housing Market Tracker - $100 Houses for Sale in Detroit

You are correct - Inner City Detroit is actually now less populous than its exurbia surrounding it. Detroit is the epicenter of outsourcing destruction. Ironic that Henry Ford knew he needed to pay his workers high enough wages so that they could buy the very cars they produced. Detroit suffers from a crime perception as well - with the horrendous economic conditions there, it's very tough for anyone to make a living.

Why Cisco Should Buy Alvarion - Not Navini

Would it be difficult to figure out the multiples at which CSCO is acquiring Navini? Would be helpful to putting a valuation on ALVR as a potential acquisition.

Disclosure: Long ALVR and ALVR options

Enron, Subprime and the Derivative Disease

"...somehow aggregating large bank conduit risk into a single subprime burrito will somehow draw foreign and domestic investors back to the structured asset trough..."

That is writing, Sir! Very nice job. You have articulated this laughable plan perfectly. They should print your article in the WSJ.

Keep up the great writing! I will cite your article and authorship on my blog today as one of the best reviews and opinion pieces I've read on this subject.

Daniel Jones
e-bluewater.com

Next To Fall: The Publicly-Traded Government-Sponsored Mortgage Lenders

Meanwhile FRE is floating $500 million tranches of preferred stock in order to support its common via buybacks. Interesting tact to alter the balance sheet and fund the losses to equity that are happening.

Disclosure: Long FRE and FNM puts. (and writing about it on seeking alpha too).

Daniel Jones
Nice Job Michael.

Downey Financial: Foreclosures Surge in Second Quarter

Thanks Colin. Great article. I'll be a subscriber.

Freddie Mac: Capitalize on Subprime Chaos

I have to heartily disagree. Labeling analysis of three quarterly losses as "misrepresentation" and "noise" is itself misrepresentation and noise. Perhaps you are one of the analysts like the Freidman Billings person who thinks "GAAP economics don't apply here". Utter nonsense. FRE is very much like the Bear Hedge funds that have now blown up. Using their delays in reporting and accounting machinations, they can mask their losses & hope for better days. Heck of an investment strategy.

FRE may soon be relegated to only providing for affordable housing loans. That enhanced business model, unchanged from the 80's as you put it, needs to radically change. This turkey is cooked. Stick a fork in it.

I'm long puts - would you care to disclose your position?

Daniel Jones
e-bluewater.com