Financial, Real Estate, Stock Markets Trends and Current Affairs

A trader has informed me of the following ticker:
TNSUTL - This bond apparently was issued in Dec of 2006 --- 12/11/2006 --- at an issue price of 109.434. The ratings are roughly AA-. I am told that these bonds carry the underlying rating of Goldman Sachs, as they are an obligation of J Aron, a GS sub.

According to my source, the ten year treasury in Dec 2006 was around 4.70% --- now it is 3.58%. These muni bonds are now trading at around $93 --- and apparently they have been trading at significant volume.

Goldman's balance sheet expanded by 300% from 2003 to 2007 --- and most of the other I banks increased thier balance sheets substantially as well.

It is worth noting that this muni is not a distressed mortgage
asset --- nor leveraged loan --- nor CRE --- it is probably pretty typical of
a structured finance security of that era --- and it is down in price
now by 16 POINTS!

That
is how wide and illiquid the market still is despite all of the Fed's efforts. Now, leverage this
by 25 to 35 times and I'm sure it is indicative of the stress that the IB
balance sheets are under. They booked scores of assets at
whatever yield, and now the values of all of those bubbly inflated assets --- even the relatively good
stuff like this, are materially lower. The deals are about 1 billion each, and word is GS did $3B for this issuer.

sg2008040351502.gif

All of these schemes and machinations... Why don't they just take their medicine and sell them at market value - to the market! From FT Alphaville:

Wall St banks to ring-fence bad assets

Wall Street banks are drafting plans to separate troubled assets from the rest of their businesses in efforts to ring-fence problems and restore confidence in the financial sector. A number of US firms are looking to follow the example set by UBS, which this week put securities linked to US mortgages into a separate subsidiary with a view to reducing its exposure to the troubled assets, which have been responsible for more than $30bn of losses so far. The banks – among them Lehman Brothers - aim to move at least some troubled assets off their balance sheets by selling large stakes in the funds to outside investors.

Let's hear your opinions. Will it work this time around?

He does make one interesting point here that I need to followup on,
and that is counterparties running away. I heard Lehman lost a few
billion worth of clients and counterparties.

Lehman Brothers Too Big To Fail? Don't Count On It

Wall
Street is in a full meltdown. Bear Stearns (BSC) is gone, so the
markets are wondering who's next. The leading contender? Lehman
Brothers (LEH).

Lehman's stock dropped 15% on Friday, and it's down by another third in pre-market trading. Some specific concerns:

* Like Bear Stearns, Lehman is relatively small and undiversified.

* Like Bear Stearns, Lehman just reiterated that its "liquidity position is strong."

*
Like Bear Stearns, at least one of Lehman's trading partners is cutting
it off: The WSJ reports that Southeast Asia's biggest bank, DBS
Holdings, has asked traders not to enter new transactions with Lehman
Brothers. "DBS has sent an internal e-mail saying it would not deal
with Lehman Brothers from now on." [Update: DBS has since re-authorized
some Lehman trades]

* Like Bear Stearns, Lehman gambles about $30 for every $1 it has.

* Like Bear Stearns, Lehman chose not to raise additional capital last fall.

* Like Bear Stearns, no one has any idea what's really on Lehman's balance sheet (including, probably, Lehman)

*
Unlike Bear Stearns, says an analyst at ING, Lehman is NOT too big to
fail, which means that the Fed might not be in such a panic to bail it
out.

If Lehman is hellbent on following the Bear Stearns
playbook, it will now trot Dick Fuld out onto CNBC to say that the bank
is in great shape. And then, a day or two later, it will go bankrupt

I will try and detail this thesis on the blog, but I am currently swamped with my entrepenurial matters. Hopefully a lot more to come... Take note that this is the 3rd time the IMF has dropped forecasts in just a few months, and now it is below their long term growth trend. I need to build up critical mass in capital in order to fully take advantage in what I see as a potential global rout.

From Bloomberg:

IMF Cuts Global Forecast on Worst Crisis Since 1930s

The International Monetary Fund cut its forecast for global growth this year and said there's a 25 percent chance of a world recession, citing the worst financial crisis in the U.S. since the Great Depression.

The world economy will expand 3.7 percent in 2008, the slowest pace since 2002, according to a document obtained by Bloomberg News at a meeting of Southeast Asian deputy finance ministers and central bankers in Da Nang, Vietnam. In January the fund projected growth of 4.1 percent.

The reduction is the third by the Washington-based lender since last July, when it predicted the world economy would cope with the U.S. credit squeeze and grow 5.2 percent this year. Central banks will need to conduct policy ``as flexibly'' as the circumstances warrant, the statement said, adding that the European Central Bank has room to lower borrowing costs.

``The financial shock that originated in the U.S. subprime mortgage market in August 2007 has spread quickly, and in unanticipated ways, to inflict extensive damage on markets and institutions at the core of the financial system,'' the statement said. ``The global expansion is losing momentum in the face of what has become the largest financial crisis in the United States since the Great Depression.''

The world's biggest financial companies have reported about $232 billion in credit losses and writedowns since the start of 2007, data compiled by Bloomberg show. UBS AG said yesterday it will have $19 billion more writedowns on assets related to mortgage assets, and Deutsche Bank AG reported $3.9 billion of further value reductions...

..."The IMF's forecast is now below the world economy's longer- term trend so there is certainly some significance in what it is now seeing,'' said Andy Cates, a global economist at UBS in London. ``The world economy is slowing quite considerably and will be very different from what we've become accustomed to.''

The IMF gave a 25 percent chance that global growth will drop to 3 percent or less in 2008 and 2009, a pace the fund described as equivalent to a world recession. The last time that happened was in 2001...

..."Growth in the U.S. and Europe is slowing sharply,'' the IMF document said. ``The ECB can now afford some easing of the policy stance.''

The ECB has left its benchmark rate at a six-year high of 4 percent as inflation runs at 3.5 percent, above its goal of 2 percent and almost the fastest pace in 16 years.

``The greatest risk comes from the still-unfolding events in financial markets, particularly the potential that deep losses on structured credits related to the U.S. subprime mortgage market and other sectors would seriously impair financial-system capital and initiate a global de-leveraging that would turn the current credit squeeze into a full-blown credit crunch,'' the statement said....

... Japan's economy, the world's second largest, will grow 1.4 percent in 2008, less than the 1.5 percent the IMF predicted in January, according to the statement. China will grow 9.3 percent this year, slower than the 10 percent projection made in January, the statement said.

The Asian Development Bank today lowered its forecasts for Asia, and said central banks in the region would pursue policies to quell inflation rather than spur economic growth. The World Bank earlier this week also warned of the threat of rising energy and food prices.

Asia excluding Japan is predicted to expand 7.6 percent this year, less than a September estimate of 8.2 percent, the Manila- based ADB said in a report today...

... "The IMF only really forecasts these things after they've begun,'' he told Bloomberg Television. ``You've got America, Italy and several other European countries and one or two Asian countries, actually in or very close to recession, and yet the IMF just now begins to talk about this phenomenon.''

The IMF statement said world inflation would remain elevated in the first half of 2008.

The U.S. dollar is strong relative to fundamentals and China's yuan remains ``substantially undervalued,'' the document said....