Bill Gross thinks conditions are ripe for a liquidity crisis, and he points a finger at his old firm for its potential to be at the center of the storm.» Read More
Allstate sues Bank of America—and Mozilo (Reuters) "Allstate Corp has sued Bank of America Corp, its Countrywide lending unit and 17 other defendants for allegedly misrepresenting the risks on more than $700 million of mortgage securities it bought from Countrywide. Allstate, the largest publicly traded U.S. home and auto insurer, alleged it suffered 'significant losses' after Countrywide misled it into believing the securities were safe, and the quality of home loans backing them was high. The lawsuit also names several former Countrywide officials as defendants, including longtime Chief Executive Angelo Mozilo. Countrywide was the largest U.S. mortgage lender before Bank of America bought it in July 2008."
PIMCO's Bill Gross Bullish on the Muni Market (CNBC) CNBC's Jeff Cox tells the story of Bill Gross's 'strong buy' on municipal bonds. Said Gross: ''Despite the risk there's always the reward function, and you can get 6.65 percent in New York City Build America bonds, and 7 percent-plus in California,' he said. 'That's decent return relative to the admittedly higher risk these days.'"
European Companies Pay the Price for Eurozone Sovereign Woes \(Financial Times\) "European companies’ relative cost of borrowing has risen above that of US groups for the first time since the financial crisis as the worries about sovereign debt in the eurozone hit businesses. Debt issued by European companies has historically traded lower compared with government benchmark rates than that of their US rivals. But since the end of November, European companies have started paying a higher premium, according to Bank of America Merrill Lynch corporate debt indices. The data suggest European companies are starting to pay the price for the sovereign debt crisis that has hit countries such as Greece, Ireland and Spain. It comes at the same time as growth prospects in the US have improved."
About 20 percent of the banks that received TARP funds from the US Treasury have missed payments.
Of the 707 banks that received Treasury funding during the Troubled Asset Relief Program, 139 have not made timely payments to their Treasury Department creditors.
A new paper by finance professor Dr. Linus Wilson, of the University of Louisiana at Lafayette, explores the underlying data. Specifically, Wilson looks at how banks that received over $6 billion in Treasury funds have fallen behind on their dividend payments to the government.
In his analysis of the causes of the defaults, Wilson concludes that: "Banks with weaker core capital ratios, more charged off loans, more allowances for loan losses, more non-performing loans, and lower returns on assets are more likely to miss their Troubles Asset Relief Program \(TARP\) dividends."
According to economist Nouriel Roubini, the housing market is in a double dip.
And negative Case-Shiller Home Price numbers out today only confirm that unpleasant truth.
"It's pretty clear the housing market has already double dipped," says Roubini. "And the rate of decline is stronger than in previous months," he said of the new housing data.
Aside from below trend economic growth, there are two factors specific to the housing market that are putting downward pressure on home prices.
Various members of the NetNet crew are in and out this vacation and snow-filled week, so we've asked a few friends to fill in. The following is from hedge fund manager and financial columnist James Altucher ...
You want to see a "V"? Look at the rebound last year in spending of software and equipment by businesses:
— Basically, tech is going to benefit from two things...
1. After reading this article, I actually bought some of the applications. One of the few articles I read that actually improved my life a little bit. Top 10 online applications .
2. Is Chinese the new language of the Internet .
3. Online dating, Uri Geller the psychic, and how I met my wife .
4. Will the demand for Silver, Continue into 2011 ?
5. Does the January Effect really work in the stock market?
6. The Microcap Speculator has the macro call of the year : buy Chinese microcaps. I believe this one.
7. The SEC is starting to look into all of the private trading that is going on in Facebook stock, Zynga stock, Twitter, etc.
8. And finally, LuluLemon might've gained a new customer. HowI was talked into doing yoga , the video version.
Read more from Altucher on his blog The Altucher Confidential
Case-Shiller numbers for October-September are down.
Here's the roll-up:
Composite-10: Down 1.2% — to 159.03 (October 2010)
Composite-20 Down 1.3% — to 145.32 (October 2010)
Composite-10: Down .9%
Composite-20: Down 1%
All of the 20 MSAs—Metropolitan Statistical Areas—have shown declines.
Public Trading in Private Companies (CNBC via New York Times) Looking to buy stock in Facebook or Twitter—even though those companies are privately held? Well, look no further than the secondary trading markets! It sounds exciting, doesn't it? Just remember: Your shares are illiquid. And--oh, yeah—there is the small matter of the S.E.C. inquiry into the practice itself. Good luck! (Today's Wall Street Journal also reports on the same story .)
Non-US Banks Profit from Easy Fed Credit \(Financial Times\) Here's a story that should come as a surprise to know one: Non-US financial firms benefited from Fed credit programs. But what may come as a bit of a shock is the scale: Non-US Banks received more than half of the lending from TAF—the Term Auction Facility —which was the largest of the crisis bailout programs. FT Reports: "Some of the world's strongest banks have profited from an emergency credit facility set up by the US Federal Reserve to shore up confidence in the global financial system, according to a Financial Times analysis of data released by the Fed." And then there is the small matter of collateral quality: "In the summer of 2008, TD [a Canadian bank] was borrowing $1bn from TAF at rates of between 2 and 2.5 per cent. For that borrowing it used the lowest quality - and hence highest yielding - collateral acceptable to the Fed. More than 80 per cent of its collateral had a triple B credit rating at a time when such bonds yielded about 7 per cent. TD could therefore have made a notional gross spread of about $4m a month during 2008."
The Big Thaw: New York Digs out from Blizzard (NY Post) "The snow may have stopped falling, but the mess continues. A day after the big blizzard socked the city with over 20 inches of snow, both Kennedy and Newark airports are set to reopen at 6 p.m., officials said. Kennedy Airport was closed at 8 p.m. Sunday after thousands of flights had been canceled throughout the day. Newark closed just after 10 p.m. LaGuardia Airport, the smallest of the three major New York City airports, remained closed indefinitely. Hundreds of people were stuck this morning at the three airports."
AIG Secures Private Financing \(Wall Street Journal\) AIG announced today that is has secured $4.3 billion in financing from commercial banks. The funds will replace money lent by the New York Fed, as AIG prepares t repay its government loans. AIG traded at a 52 week high, flirting with the $60 per share mark in afternoon trading. "The government-controlled insurer said it has established $3 billion in new bank credit facilities, split between a 364-day line and a three-year facility, under which banks have agreed to make loans to AIG. In addition, AIG's property and casualty insurance subsidiary, Chartis Inc., entered into a one-year, $1.3 billion letter of credit facility. The new funding is being provided by 36 banks and will be available to AIG once the company pays down and terminates its secured credit facility from the New York Fed, which was established when the government bailed out the insurer in September 2008. "
Ninety-Eight banks that received TARP funds are still in trouble, based on their third quarter financial results. The number of troubled banks has risen from 96 the prior quarter. A 2 percent increase in the number of problematic banks may not sound like an impressive jump in risk — but it certainly isn't an improvement either.
This new data comes to us today from an analysis released by the Wall Street Journal .
And the takeaway point may be this: These numbers represent an important counter-narrative from the official line of cautious optimism.
Nobel Prize-winning economist Robert Shiller says that his key valuation indicator is flashing warning signs.
The Fed is in the early stages of an analysis on changes in bond market liquidity, amid signs that liquidity may be less resilient than in past.
Janus Capital acquired a majority interest in Kapstream Capital and said Kapstream's Palghat will support Bill Gross as co-portfolio manager of the Janus Global Unconstrained Bond strategy.