Are We Getting Short Changed ?
Comments »
Joined Feb 3, 2009
1,759 Blog Posts
A Perspective on TALF
Comments »By JENNY STRASBURG
Hedge funds of all sizes and strategies are expressing strong interest in the government’s plan to unclog consumer-lending pipelines. Now they and other investors need to decide Friday if they will participate in the first round of borrowing through the Term Asset-Backed Securities Loan Facility, or TALF.
Some of the biggest hedge funds in the business have participated in calls and meetings with other hedge-fund managers, lawyers and regulators about the program. They include Harbinger Capital Management, Highbridge Capital Management, Elliott Management Corp., Paulson & Co., Perry Capital, Citadel Investment Group, Cerberus Capital Management and D.E. Shaw Group.
It isn’t clear how many ultimately will participate in TALF, which eventually could finance as much as $1 trillion in deals. Some hedge funds simply have been asked to provide input for how the program should operate or are monitoring it because of its potential impact on the markets.
The Federal Reserve and Treasury Department program, starting next week, will provide cheap funding aimed at kick-starting the market for highly rated securities backed by loans for automobiles, college tuition and other assets. That market has all but frozen during the prolonged credit crisis, and getting it flowing again is seen as crucial to an economic recovery.
The main question many hedge funds are weighing is whether the potential upside of participating in the first round of funding outweighs some of the still-unknowns, according to fund managers, lawyers representing both funds and dealers, and others involved in the talks.
Dealers, mostly Wall Street banks, are in the program acting as the lender, using financing provided by the Federal Reserve through a master loan agreement. It is the dealers’ job to select eligible investors. The dealers have set Friday as a deadline for investors to decide whether they want to apply to participate in the first round of TALF-funded deals.
At issue still are terms in the agreements between dealers and funds that hedge funds say would expose them to losses greater than what they invest in the program. Dealers are saying they have to protect themselves from potential losses.
Conference calls and meetings about TALF have continued almost nonstop this week in Washington and New York, people involved in discussions say. People involved, from the regulators to Wall Street firms and hedge funds, have made concessions, and dealers and hedge funds are both sensitive to concerns that they’ll be seen as holding up TALF. Executives of the Managed Funds Association, the hedge-fund industry’s chief U.S. lobbying group, have told some of the group’s members that hedge funds are especially vulnerable to being painted as more concerned about profits than an economic recovery.
“I expect a number of big investors will wait and participate in the April funding rather than the March funding,” Paul Watterson, a fund lawyer with Schulte Roth & Zabel in New York. “There’s a big gap between what the primary dealers want in the customer agreement and what the big investors in this market were expecting.”
Dealer-investor agreements aren’t written in stone, and the agreements also could end up being customized during negotiations between banks and hedge funds, despite efforts to have a uniform agreement in place, say people familiar with the discussions.
“I think this first subscription is really a learning experience for everybody,” says Chris Killian, associate director of the American Securitization Forum, which represents structured-finance market participants. “Nobody knows exactly what to expect out of this, and the agreement is going to get better because of it.”
The American Securitization Forum and the Securities Industry and Financial Markets Association, representing the dealers participating in TALF, drew up the roughly 40-page document designed to serve as a contract between dealers and funds seeking to invest in the program.
Consumer Sentiment Comes in @ 56.6 vs. Expectations of 55… Plus a Pod Cast From Blanch on The Potential Stabilization in Oil
U.S. Trade Deficit Were Down 9.7% or $36 billion. Imports Were Down .02% … Plus Market Movers
GS Cuts Global Growth Forecast, They See the Global Economy Shrinking by 1%
This is their second cut with fears over Europe
Comments »March 13 (Bloomberg) — Goldman Sachs Group Inc. cut its forecast for the global economy for the second time in eight days after predicting a deeper recession in Europe.
“Following the reduction of our Euroland growth forecast to minus 3.6 percent in 2009, the world economy is now likely to contract by 1 percent this year,” said London-based Goldman economist Binit Patel. On March 5 Goldman lowered its 2009 outlook for world gross domestic product to a drop of 0.6 percent from a 0.2 percent decline.
Finance ministers from around the world are meeting near London today and tomorrow to find a way to battle the world recession. Governments have pumped billions of dollars into financial systems to prop up banks and other industries after the worldwide credit squeeze stifled growth.
Europe & Asia Continue to Rally Showing Strength in the Banking Sector
Comments »March 13 (Bloomberg) — The MSCI world stock index snapped four weeks of losses to rally the most since November and U.S. futures rose as Bank of America Corp. said it will be profitable this year and Japan and China pledged aid for the economy.
Barclays Plc and Credit Suisse Group AG rose more than 7 percent as Bank of America’s Chief Executive Officer Kenneth Lewis said he expects the biggest U.S. bank to make money this year. Mitsubishi UFJ Financial Group Ltd. added 5.8 percent as Japan’s Prime Minister Taro Aso ordered a third stimulus package. U.S. Treasuries fell after China’s Premier Wen Jiabao said he’s “worried” about the country’s holdings of American government debt and wants assurances that the investment is safe.
The MSCI World Index of 23 developed nations climbed 1.4 percent at 10:26 a.m. in London as Bank of America joined JPMorgan Chase & Co. and Citigroup Inc. in saying that it made money during the first two months of 2009. The MSCI World’s 8.4 percent gain since March 6 erased only one week of losses, leaving the global gauge at the highest since Feb. 26.
“We are getting to a stabilization of the larger financial institutions,” said Lucy MacDonald, London-based chief investment officer of global equities at RCM UK Ltd., which has about $100 billion. “There is a lot of liquidity being pumped into the system. We seem to have found a short-term bottom to the market,” she said in a Bloomberg Television interview.
Futures on the Standard & Poor’s 500 Index added 0.7 percent, indicating the benchmark index for U.S. equities may extend its weekly surge of 9.9 percent.
Swiss Central Bank
Europe’s Dow Jones Stoxx 600 Index climbed 1.9 percent as BHP Billiton Ltd. and SAS Group jumped. The regional gauge has advanced 6.9 percent this week, led by financial and raw-material shares, as the Swiss central bank cut its interest rate to close to zero and China’s spending on factories increased.
The MSCI Asia Pacific Index added 3.5 percent today, leaving it with a gain of 3.7 percent since March 6. Canon Inc., the world’s biggest camera maker, rose on a profit forecast.
The yield on the benchmark 10-year Treasury note rose four basis points to 2.92 percent, according to BGCantor Market Data. China, the U.S. government’s largest creditor, is requesting “the U.S. to maintain its good credit, to honor its promises and to guarantee the safety of China’s assets,” Wen said at a press briefing today in Beijing.
Barclays, the U.K.’s third-biggest bank, rose 8.3 percent to 77.9 pence. Credit Suisse, Switzerland’s second-largest, added 7.8 percent to 30.82 Swiss francs. Bank of America’s comments suggested bank profits are rebounding after the worst year for financial institutions since the Great Depression caused writedowns and losses worldwide to swell to $1.2 trillion.
American Banks
Bank of America gained 4.6 percent to $6.12 in pre-market New York trading, after rallying 86 percent this week. Citigroup added 3.6 percent to $1.73 after climbing 62 percent since March 6. JPMorgan rose 2.8 percent to $23.85 in New York.
Mitsubishi UFJ climbed 5.8 percent to 419 yen. Mizuho Financial Group Inc., Japan’s second-largest bank, gained 4.7 percent to 179 yen.
Japan’s Prime Minster Aso will ask ministers to propose measures and may be ready to announce a package to world leaders at the Group of 20 summit in the U.K. in April, Finance Minister Kaoru Yosano said in Tokyo today. Yosano also said the government will sink funds into Minami-Nippon Bank Ltd. and Fukuho Bank Ltd.
Governments from Tokyo to Beijing and Washington have stepped up efforts to avert what the World Bank predicts will be the first global economic contraction since World War II. Goldman Sachs Group Inc. now predicts a 1 percent contraction for the global economy, compared with the 0.6 percent it previously anticipated, according to London-based economist Binit Patel.
‘Any Time’
China can add “at any time” to 4 trillion yuan ($585 billion) of stimulus measures to revive the world’s third-biggest economy, Premier Wen told reporters in Beijing. He reaffirmed China’s target for 8 percent growth in 2009.
China Life Insurance Co., the nation’s biggest insurer, jumped 4.4 percent to HK$23.60 in Hong Kong. Industrial & Commercial Bank of China Ltd. rose 4.4 percent to HK$3.33.
Speculation that China may boost its stimulus measures helped lift raw-material producers.
BHP Billiton, the world’s largest mining company, climbed 3.8 percent to 1,359 pence as copper advanced in Asia and oil traded near $47 a barrel. Rio Tinto Group, the world’s third- largest mining company, added 5.1 percent to 2,165 pence.
SAS Group surged 10 percent to 24.30 kronor. The owner of Scandinavian Airlines said it will sell shares at an 88 percent discount after suffering the biggest loss in at least 16 years.
‘Relief Rally’
“It’s a relief rally now we know that they’re going to be able to raise the money,” said Erik Gustafsson, an analyst at D Carnegie AB in Stockholm. “The very low price guarantees the shares will be placed.”
SAS had a 6.2 billion-krona full-year loss, the largest in at least 16 years, and is responding with plans to eliminate 9,000 jobs, drop routes and sell divisions. Deutsche Lufthansa AG, Europe’s second-biggest airline, remains interested in SAS, though has no immediate plans for any acquisitions, Aage Duenhaupt, a spokesman, said.
Canon climbed 8.6 percent to 2,475 yen in Tokyo. The company said yesterday its net income will increase to 150 billion yen in 2010 from this year’s forecast of 98 billion yen. That reflects Canon’s expectations that the global economy will recover next year.
