Some of the recent speculation about where rates are going seems to have gotten at least a bit overdone.» Read More
S&P Futures are currently down 2.42 percent. But that number is still less severe than the plunge seen before The Lehman Brothers collapse, when S&P futures declined 3.7%.
The catastrophic declines in equities now seem limited to Japan – where the Nikkei plunged 10.55 percent.
To add perspective to that figure, the Black Monday 1987 selloff saw the Dow Industrials drop 22.61 percent.
The exposures of various insurance companies to the economic devastation of the Tsunami may be dominating the financial discussions in the tragedy's wake – but Japanese banks may be at the most risk.
And that risk may become a tragic test case for an economic conundrum described by Warren Buffett .
Here's the background.
An Australian hedge fund manager named John Hempton has done analysis on a Japanese financial institution called 77 Bank.
The bank is located in Sendai, which is the Japanese city most affected by the tsunami.
Not only is the bank located in the city that sustained the most damage, it also has a near 50 percent market share in that metropolitan area.
Here's the rub. Hempton writes:
"Warren Buffett once said that Fannie Mae had more supercatastrophe risk in it than Berkshire Hathaway. He figured the really really big hurricane or earthquake could do more damage to Fannie than Berkshire even though Berkshire is the largest supercat insurer in the world.
Buffett was – I suspect – right.
We now unfortunately have a gruesome test of Buffett statement on finance and supercatastrophe. There is probably more uninsured damage in the destruction of North East Japan than in any other event in history – and uninsured damage falls sharply on banks.
77 Bank – deeply concentrated in the disaster zone – is the test. It is not a test I would want to repeat. But I think we will – at the end of this – be able to confirm Buffett’s observation that banks don’t like supercats."
World stocks at 2.5 year lows; oil falls nearly 2 percent. [CNBC]
Treasuries prices rise on 'flight from disaster' [Bloomberg]
Impact on Japanese yen. [Business Week]
On the show this morning, we got a spokesperson from Prime Minister Kan's office on the phone.
Beware the ides of March. In between my re-reading of Julius Caesar, here's what I was looking into:
Earthquakes, hurricanes, floods, tsunamis, volcanoes and even chemical or nuclear disasters can provoke a strong urge on the part of people to want to provide disaster relief in the form of charitable donations directed at those afflicted by the most recent disaster.
It's like Marie Antoinette talking about the falling price of cake: That's the kind of reaction you get when you go to Queens and tell a room full of ordinary folks that the price of iPads is falling. Especially when you're a central banker.
As previously discussed, one of the bigger revelations that could cause issues for Raj Rajaratnam is that his “business associate and friend,” Rajat Gupta, passed him inside information obtained from Gupta’s post as a board member of Goldman Sachs, which the Galleon founder proceeded to \(allegedly!\) trade on. In one particular instance, on October 23, 2008, Gupta rang up Rajaratnam twenty three seconds after an informative call with Lloyd Blankfein about the company’s financial situation. The swiftness with which Gupta funneled information to his pal presumably pleased Raj greatly, as it was a characteristic he looked for in all of his tipsters, going so far as to put it at the top of the ‘must haves’ in the listing for the gig. So you can imagine that the hedge fund manager was not at all pleased when Rajat tried to resign from the Goldman board and dry up his well.
Pressure is building for the US to take action in Libya.
The Arab League formally proposed that the UN authorize the creation of a no-fly zone. France and Britain have drafted a resolution authorizing the no fly zone. The matter is being debated among UN Security Council members . France and Britain are trying to forge an agreement on a no-fly zone among G-8 members at a meeting in Paris. Russia has softened its stance—saying it wants more information on the Arab League proposal .
"Money for nothing" interest rate policies have failed, the bond guru said in a broadside against global central banks.
Bank of Ireland, which was bailed out during the country's debt crisis, reported soaring profits for the first half of 2015 as bad debts were reduced.
Lloyds Banking Group reported a 15 percent jump in pre-tax profit for the first half of 2015 to £4.4 billion ($6.9 billion) on Friday.