Well – a short week, but not entirely devoid of interest!<\/p>\n
Today’s big news was that the US Jobs number was negative<\/a>, which hasn’t happened in a while. Politicians<\/a> reacted according to their stripe; economists<\/a> hastily revised downwards their expectations for both growth and rates. Greenspan sounds very happy it’s not his problem<\/a>. There is general agreement chances of a recession have increased<\/a>.<\/p>\n I’ve previously mentioned Deutsche Bank’s success at Credit Anticipation in betting against sub-prime. Another\u00a0winner emerged today<\/a>:<\/p>\n The $4.5 billion Credit Opportunities fund, started last year, gained 26.7 percent in August, according to a Paulson investor. Credit Opportunities II, a newer $2.3 billion fund, is up more than threefold after a 32 percent return last month.<\/p>\n<\/blockquote>\n I feel quite sure that a lot of these massive losses we’re reading about are just hedge funds transferring money back and forth … when you share 20% of winnings and 0% of losses, why not bet the firm?<\/p>\n The Canadian bank-operated ABCP market<\/a> is having major problems. Three-month BAs are yielding about 5% … ABCP is yielding about about 5.60% … when three-month bills are at 4.04%<\/a>. That kind of spread is … well, let’s just say that banks are not having a nice time. Mind you, it’s even worse in the States, with bills at 4.07%<\/a> and financial paper at 5.48%<\/a> (US ABCP at 6.18%). While we’re on the topic of ABCP, the outstandings in America<\/a> continue to shrivel, which indicates a ferocious combination of deleveraging and transfer to bank lines. The ‘transfer to bank lines’ part is dangerous – there is some concern<\/a> regarding the banks’ committments and whether regulators need to step in. I don’t know, frankly, if line committments are added in any way to risk-adjusted capital. They should be! Especially since laying off risk is, to an extent, boomeranging<\/a>.<\/p>\n Countrywide Credit is having a mass layoff<\/a>, trying to survive in environment where it’s difficult, to say the least, to securitize mortgages that it originates. Citigroup is reportedly refusing to accept<\/a> new mortgage clients. But maybe they’re just providing bigger lines to fewer clients.<\/p>\n Centex Corp., a Dallas-based homebuilder and lender, said in a regulatory filing today it replaced a warehouse credit line with a larger one arranged by JPMorgan Chase & Co. that may provide as much as $1 billion. Centex increased the credit line because the global credit crunch made it hard to rely on selling short-term notes to finance mortgages, the filing said.<\/p>\n<\/blockquote>\n US equities<\/a> went splat on the jobs number. Recessions aren’t generally good for profits! Canadian equities\u00a0also fell<\/a>.<\/p>\n Treasuries<\/a> had such a good day on the back of the jobs number it has to be referred to as panic-buying (possibly sending a lot of profit to foreign\u00a0central banks<\/a>, since boneheaded fiscal policies have sent a lot of money abroad<\/a>).\u00a0Why not, when\u00a0Fed Fund Futures<\/a> are predicting a\u00a0rate of 4.5%\u00a0by December? Well, perhaps because\u00a0Fed officials are watching the\u00a0economy, not markets<\/a>.\u00a0Canadas<\/a> had a super day, with the ten-years’ yield declining about 13bp.<\/p>\n\n
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