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HomeCFO Survey: A Time of Extraordinary Risk
Posted by Larry Doyle on February 22nd, 2013 6:53 AM |
Who might that be flashing the warning signals about our markets and our economy?
I am always predisposed to look for risk on the horizon so that we can all navigate accordingly, but the quote referenced in the title of this commentary comes not from me but from professors at Duke University’s Fuqua School of Business.
What prompts them to make such a statement? Only a survey of over a thousand global CFOs that projects economic activity a quarter ahead of most other surveys. Now that is the type of material we like as opposed to the “look in the rear view mirror” provided by many outlets.
Let’s navigate . . .
Chief Financial Officers See More Downside Risk in the Stock Market than Upside (more…)
IMF Issues Warning on Credit Losses
Posted by Larry Doyle on April 8th, 2009 7:11 AM |
Forecasted credit losses across the residential mortgage, commercial mortgage, consumer credit, and corporate credit markets have been widely estimated to triple – if not potentially quadruple – in certain sectors. What does that mean in terms of total dollars? The IMF sheds light on these losses in an article this morning in the Financial Times:
The International Monetary Fund is likely to raise its estimate of total credit losses on US assets from $2,200bn to about $2,800bn when it releases its Global Financial Stability report later this month
Those figures equate to an increase of 27% in losses and a total figure of $2.8 trillion, which equates to 20% of GDP!!! Is there any wonder why credit is so constrained in the face of these impending losses? The IMF also sheds further light on these projected losses here in the U.S., as well as in Europe, and globally:
The new estimate, while up significantly from January, will almost certainly be lower than a $3,100bn (€2,350bn, £2,111bn) figure circulating on Tuesday, which contributed to pressure on US bank stocks.
The IMF is also expected to release for the first time an estimate of total losses on European assets, which is likely to exceed $1,000bn. The fund is likely to put total losses globally at slightly above $4,000bn, including some additional losses on Asian assets. (more…)
Games of Chance: TALF, PPIP, TARP, FDIC, FASB
Posted by Larry Doyle on April 7th, 2009 2:40 PM |
In thinking about the economy, markets, and our banking system, my memory brings me back to my early days in New York. While working my way along 8th Avenue back to my apartment in Hell’s Kitchen, I would happen upon numerous versions of the classic NYC “hustle.” The shell game (also 3 card monte) was rampant in NYC in the ’80s. Mayor Giuliani cleared out this game, along with a host of other street scenes. For those not familiar with this game, there was a constant need for new players with new money to keep the game alive.
Why do these games remind me of our current banking system? The similarities are scary. Let’s access the most recent piece from John Mauldin’s site to “view the games.”
Mauldin’s guest, John Hussman, comments on these various “games” (TALF, PPIP, TARP, FDIC, FASB), in which taxpayers bear the brunt of the risk in the government’s engagement with financial institutions. Hussman writes of the PPIP:
this is a recipe for the insolvency of the FDIC and an attempt to bail out bank bondholders using funds that have not even been allocated by Congress. The whole plan is a bureaucratic abuse of the FDIC’s balance sheet, which exists to protect ordinary depositors, not bank bondholders.
Audio Recording: NoQuarter Radio’s Sense on Cents with Larry Doyle
Posted by Larry Doyle on March 22nd, 2009 9:36 PM |
In case you missed LD’s Sunday night radio show, just click on the Play button below for the audio recording. Once the playback has started, you can fast forward or rewind to any portion of the show by clicking at any point along the play bar.
The first portion of the show included a review of the markets and an in-depth analysis of the very critical challenges facing the insurance industry.
The second half of the show included an interview with Chuck Doyle of Business Capital in San Francisco. Chuck is one of the leading professionals in the field of debt restructuring and recapitalization.
Sunday night, March 22nd, 2009
NoQuarter Radio’s “Sense on Cents with Larry Doyle”
These Companies Do Not Want Your Business
Posted by Larry Doyle on March 21st, 2009 2:11 PM |
Many credit card companies are now offering incentives for a wide range of their customers to “take their business elsewhere” and return their cards in the process. Are these companies trying to turn business away? Have they expanded too rapidly? Are they having operational issues? Are they afraid of what the future holds? In a word, the simple answer to all those questions is YES!!
Credit card companies are already experiencing a significant increase in delinquencies and defaults and expect both those figures to ratchet higher in the face of rising unemployment. (more…)
AIG and LTCM
Posted by Larry Doyle on March 18th, 2009 3:50 PM |
A precursor to the turmoil roiling our economy and markets today occurred on a smaller, but certainly very dramatic, scale in 1998. The meltdown of the hedge fund Long Term Capital Management brought the market to its knees at the time. LTCM was effectively taken over by a consortium of Wall Street banks at the behest of New York Federal Reserve Chairman, William McDonough. The firms injected approximately $3 billion dollars in order to stabilize LTCM and then unwound it in an orderly fashion.
The lessons learned in the LTCM crisis were obviously not learned well enough because we are experiencing them again a multiple hundred fold. The centerpiece of our current fiasco is AIG (known here at Sense on Cents as “Ain’t It Great”).
The dramatic story of Long Term Capital Management is captured in a book I strongly recommend for anybody interested in the history of the financial markets. When Genius Failed, by Roger Lowenstein, is a great read and truly captures the intrigue, egos, and tension of that period. As the current turmoil unwinds I look forward to the books published on this period as well. (more…)
Let’s Revisit Europe: The Weakest Link
Posted by Larry Doyle on March 17th, 2009 5:15 AM |
I thank our loyal reader in Michigan, Mr. Fiscal Liberal, for sharing with us a piece written by Simon Johnson, the former chief economist of the International Monetary Fund, a professor at the MIT Sloan School of Management, and a senior fellow at the Peterson Institute for International Economics.
Mr. Johnson writes about the growing problems in Europe. I am hard pressed to see how the European situation, both in the East and West, can not end badly. There are too many economies that are effectively insolvent or on the brink of insolvency. I believe this is the region of the world which will experience increased economic strife leading to social unrest and political change. Can the problems in Europe be contained given the massively interconnected world of global finance?
Thank you again FL for sharing this very enlightening piece from Simon Johnson!!
G-20s Real Agenda Should be Saving Europe from Itself
By Simon Johnson
Last Updated: 10:28AM GMT 16 Mar 2009The media coverage of the G20 finance ministers meeting this weekend was dominated by the apparent battle between those who support more fiscal stimulus and those who want to impose more regulations on the financial system.
This, we are led to believe, is the big debate facing the full G20 heads of government summit early next month: the US is pushing for a bigger global fiscal stimulus (2pc extra government spending from everyone, to be monitored by the IMF), while the continental Europeans are holding out for greater regulation. Gordon Brown is trying hard to cast himself as the broker for any apparent deal. (more…)
Is My Insurance Insured?
Posted by Larry Doyle on March 12th, 2009 6:30 PM |
The world of insurance occupies almost every corner of our lives. Life, home, auto, disability, long term care, personal articles. Rather than addressing what is insured, an easier question may be to ask what isn’t insured.
Given the intricate web of products and accompanying risks, we clearly are not currently dealing with your grandfathers’ insurance companies.
All that said, insurance is a relatively simple business. A policy is underwritten, premiums are collected and invested, and on and on we go. In fact, with major policies incorporating outsized risks, insurers can “lay off” risk with reinsurers, such as Munich Reinsurance, Swiss Reinsurance, and General Reinsurance. One would think this should be a steady and stable, if not quiet, industry. It would be such if companies did not reach for outsized returns through ever greater risks, primarily in the products in which they invested. While The Quiet Company, Northwestern Mutual invests primarily in high quality corporate bonds, entities like AIG trafficked in esoteric CDS. Hartford Financial Services played in the lower credit sectors of the commercial mortgage space, sub-prime mortgages, and junk bonds. (more…)
