PrefBlog

There may be some spikes in commercial paper rates shortly as $700-billion in CP needs to be refinanced. There’s also a good chunk in Europe … so we may see some spectactular flame-outs.

We’re not over the hump yet, and won’t be for several months, as forecast by Ed Clark of TD. There are still lots of hedgies that haven’t blown up yet, although Y2K Fund has now halted redemptions:

The fund dropped 30 percent over June and July, according to data compiled by Bloomberg. It had been the best performing non- U.S. hedge fund investing in fixed income in the three years to the end of September 2006, according to Bloomberg data.

Maurice Salem, who founded Wharton in 1993 and runs the firm, didn’t answer calls to his mobile phone. Calls to the company’s offices in London weren’t returned. The Y2K fund was established in 1999.

Wharton’s Trio Finance Ltd. fund, which invests in real estate asset-backed securities, has fallen 46 percent this year, according to Bloomberg data.

Yesterday I mentioned Flaherty’s solution to the sub-prime crisis, namely: let the feds be in charge of capital market regulation. I was very pleased to see that there is at least one other person in Canada who noticed one vital thing about his remarks:

[Quebec Finance Minister] Ms. Jérôme-Forget said Mr. Flaherty has no business using the credit crisis to advance his campaign for a single regulator because there is “absolutely no link” between the subjects.

European Central Bank President Jean-Claude Trichet weighed in on regulatory reform:

Stressing the positive aspects of recent financial innovations to repackage and sell debt, Mr. Trichet nonetheless called the complexity of some debt products “overwhelming.” He said, “instruments and structures that cannot be fully understood even by those who bear the ultimate responsibility of the level of risk taken by financial institutions should not be acquired or set up by banks and investors who are lacking sufficient sophistication in the management of the risks.”

Mr. Trichet also called a dearth of ratings agencies problematic “for the present functioning of global finance” and suggested the agencies work out “benchmarks for improved behavior,” particularly on potential conflicts of interest. But he blamed investors equally: “An important lesson of the current risk re-pricing is that investors must never take the opinion of rating agencies as a substitute for their own credit analysis and due diligence.”

Well … I’d like to hear more about “benchmarks for improved [Rating Agency] behavior” … but three cheers for the rest of his comments! Who knows, if the hedgies take his advice they might last a little longer:

How often do hedge funds fail?
Lacking accurate data on the failure rate of hedge funds, most studies use the number of funds that stop reporting to the Lipper TASS database. According to this proxy, the average lifespan of a hedge fund is 40 months, with a median life of 31 months. Fewer than 15 per cent of hedge funds last longer than six years, while 60 per cent disappear within three years.

Meanwhile, US equities had a great day on hopes of a Fed easing and lots of consumer spending, aided by a Manpower report indicating jobs aren’t as scarce as all that. Canadian equities also rose on hopes that then we can sell them rocks and trees.

However, the Treasury market is now worried that it overshot but even with the rise in yields:

Yields on two-year notes, which are more sensitive to interest-rate changes than longer-term securities, are 131 basis points less than the Fed’s benchmark lending rate, near the biggest difference since January 2001.

Canadas followed.

There were ten other $25-equivalent index-included issues trading over 10,000 shares today.

This entry was posted on Tuesday, September 11th, 2007 at 9:47 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.