The Inquisitive Mind

The past two weeks have been full of earning report, and more significantly, earning surprises. While the stock market has been on a roller coaster ride many investors have been on the sidelines, confused by Wall Street’s reaction. Traders are making merry; buy the dips, sell the rips seems to be working really well. In [...]

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Sub-Prime Mortgages have been at the top of the air-waves for about a year now. The collapse of two hedge funds run by Bear Sterns started the procession. Numerous Wall Street executives have lost their jobs and banks have been writing down about $250B in losses attributed to products linked to sub-prime mortgages.

Last week two [...]

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The credit-markets are showing signs of life again. The buy-under of Bear Sterns (BSC) and subsequent actions by the Fed to allow Investment Banks to access the discount window using asset backed paper as collateral seem to be having the right effect. The market cheered when Lehman Brothers (LEH) was able to place an offering [...]

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Lehman Brothers has announced a preferred stock offering to raise $3B in new capital. The preferred will have a yield between 7-7.5% and a conversion premium of 30-35% over the common stock. Though the deal has not closed yet, the word is that the offering is three times oversubscribed. Lehman is running the book themselves [...]

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The airwaves are brimming with stories about the financial loss incurred by investors and financial firms due to the mortgage market meltdown. What is often ignored is that foreclosures also have a debilitating effect on communities. Home values fall reducing the tax receipts of local governments; empty homes become an eye-sore for the entire neighborhood [...]

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Friday morning was shaping out to be the much awaited follow-though day for the 400 point Dow rally on Tuesday. The equity markets had retraced a bulk of the gain and then bounced back on Thursday. The CPI number on Friday morning was benign and we seemed to be set for the races.
A few minutes [...]

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S&P was out with a report today saying that the banks are more than half-way through in recognizing losses attributed to sub-prime mortgages. They revised their estimate of total losses up to $285B from $265B but this is much less than the estimates put out by investment banks: $325B from JPMorgan Chase, $400B from Morgan [...]

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This weekend’s Barron’s has article by Jacqueline Doherty titled “Google’s Next Stop: Below 350?” The main thesis of the article is that analysts have not reduced earnings estimates for Google to account for the expected reduction in clicks and corporate ad spending. The article recommends staying clear of the stock until Wall Street recognizes that [...]

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Shares of Thornburg Mortgage are down more than 40% to 2.01 in the after hours after the company said that it was unable to meet a $28 million margin call from JP Morgan Chase, one of its lenders. JP Morgan has decided to exercise its right to liquidate the collateral under a $320 million financing [...]

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The air-waves are full of talk about recession, inflation and stagflation. Longer term interest rates are increasing while the Fed continues to cut the Fed Funds Rate, to bring short term rates down. A number of observers are questioning whether the Fed’s decision to focus on growth rather than inflation is the right one. Conventional [...]

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