PrefBlog

Merkel and Sarkozy have the perfect answer for those annoying brats who shout that the emperor has no clothes: jail ’em:

France and Germany called on the European Union to speed up curbs on financial speculation, saying some bets against stocks and government bonds should be banned as markets suffer a resurgence of “strong volatility.”

In a joint two-page letter, French President Nicolas Sarkozy and German Chancellor Angela Merkel sought proposals from European Commission President Jose Manuel Barroso on a ban on so-called naked short sales of “certain” stock and bonds, as well as on naked credit-default swaps on sovereign bonds. They call for proposals to be ready by the middle of next month rather than October as had been planned.

The clowns at Basis Yield Alpha Fund (last mentioned May 19) are squaring their rots for a good boohoohoo:

The lawyer, Eric Lewis, said Basis Yield Alpha Fund is suing Goldman to recoup the $56 million it lost on the now notorious Timberwolf collateralized debt obligation, which garnered a lot of attention during a recent congressional hearing.

The lawsuit, being filed on Wednesday in U.S. District Court for the Southern District of New York, also seeks $1 billion in punitive damages.
…
David Lehman, who joined Goldman in 2004 and worked as a managing director in Goldman’s mortgage trading operation, met with representatives of Basis to convince them that the prices Goldman was selling the Timberwolf deal at were fair and legitimate.

The lawsuit alleges that Goldman’s sales and trading desks worked together to sell the deal, which Goldman was taking a shorting position on.

“This is not a bad case for dealing with the whole issue of how Goldman was conducting its business,” said Lewis. “They were selling bonds like they were used cars, in that you say what you need to get it done.”

Golly, you know, I can’t remember a single trade I’ve ever done (including buying tomatoes at the supermarket) in which the salesman didn’t try to convince me that the price was fair and reasonable. But I guess I should point out that my experience is limited to the planet Earth. If BYAF’s principals had spent a tenth as much on analysis as they are on lawyers, their investors would be a lot better off. The full document is hosted on Scribd, world’s second worst document storage system.

Amidst all this abuse of the legal system, there’s a bit of good news:

Distressed-debt investors shouldn’t have to disclose key details of their holdings when they participate in bankruptcy cases, a U.S. judiciary advisory group said.

Hedge funds and other investors that join together during bankruptcies as creditors need not reveal the prices paid for a company’s debt or the dates of purchase, according to a proposed change by the Advisory Committee on Bankruptcy Rules of the Administrative Office of the U.S. Courts.

The move is a victory for funds that invest in an ailing company’s debt and sometimes take control after the bankruptcy. They opposed an earlier proposal from the rules committee that would have required investor groups to reveal the date they acquired a company’s debt and, if ordered by a judge, the price.

It was another very good day for the Canadian preferred share market, as PerpetualDiscounts gained 44bp and FixedResets gained 26bp on moderate-to-elevated volume.

PerpetualDiscounts now yield 6.08%, equivalent to 8.51% interest at the standard equivalency factor of 1.4x. Long corporates now yield about 5.65%, so the pre-tax interest-equivalent spread (also called the Seniority Spread) now stands at about 285bp, a dramatic tightening from the 305bp reported on June 2.

This entry was posted on Wednesday, June 9th, 2010 at 7:02 pm and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.