Posted on May - 19 - 2010
Germany’s unilateral imposition of a ban on naked short sales of European bonds, CDS and shares of the top 10 financial firms has stolen the headlines for sure, but it is part of a larger development that needs to be understood. The poor reception to the German moves seemed so obvious it begs the question: why did it do it, and why now?
Germany’s announcement followed a two-day meeting of European finance ministers that reached important decisions on a financial transaction tax and new regulations for hedge funds. In order to reach an agreement, a political compromise within the German ruling coalition was required.
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Posted on May - 19 - 2010
“In Fitch’s opinion, the package minimises near term liquidity risk for Greece, obviates the need for the sovereign to tap international capital markets until 2012 and offers the government a path to fiscal solvency, provided that the program is implemented fully and effectively,’ says Paul Rawkins, a Senior Director in Fitch’s Sovereign ratings team.
“However, whilst the support package maps out a viable route to medium-term debt sustainability, general government debt is set to rise to almost 150% of GDP before stabilising in 2013, making this route a highly challenging one,” added Rawkins.
Fitch currently rates Greece at ‘BBB-’ with a Negative Outlook, following successive sovereign downgrades from ‘A’ since October 2009. The agency notes th
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Posted on May - 19 - 2010
Lawmakers in Washington have recently taken aim at the credit card industry, and whether you agree with the spirit of the law, we believe the outcome will be less credit available to consumers. Last week the Senate passed new limits on debit-card “swipe” fees; fees which are charged by card issuers to merchants to processes transactions. This reform seems to be reasonable, although potentially damaging to credit card companies who received nearly $20 billion in such fees last year while encountering very minimal credit risk.
Yesterday Sheldon Whitehouse, a Rhode Island Democrat, proposed legislation that would allow individual states to enforce interest rate limits on credit cards, which he hopes will continue the momentum of recent “swipe” reforms. His pro
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Posted on May - 19 - 2010
You’re going to see a torrent of notes from the sell-side in coming days about Wells Fargo’s (WFC) analyst meeting, its first in 12 years, which took place in San Francisco on Thursday and Friday of last week. The company didn’t stint on providing a lot of details, so no doubt many of the notes will get down in the weeds. Here, though, are my big-picture takeaways.
1. Dick Kovacevich’s legacy lives! The company conveyed the same basic message it did 12 years ago, the last time it held one of these sessions, when Kovacevich was still CEO. A few d
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Posted on May - 19 - 2010
Cliche: History repeats itself because no one was listening the first time.
Yesterday morning’s Bloomberg story of interest involved the continued acceleration of ignorance of risk and potential pitfalls, even though we just went through this scenario.
Two years after suffering $213.2 billion of losses when debt markets froze, investors in junk bonds are accepting what Moody’s Investors Service calls the weakest creditor protections since 2007.
Even with housing starts hovering at their lowest levels on record, Beazer Homes USA Inc. managed to sell bonds this month on terms that allow it to add more debt. T
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