Browsing Tag

deleveraging

Connecting Fed cuts with credit writedowns and quantitative easing

Edward Harrison Dec 16, 2008

To my mind, lowering interest rates in the aftermath of an enormous credit bubble where institutions have just destroyed $1 trillion in capital is wrong. It distorts lending decisions such that yet more money will eventually be lent out…

Business

The Tribune files for bankruptcy

Edward Harrison Dec 8, 2008

The Tribune was simply over-leveraged with a balance sheet made for this age of debt, leverage and bubbles. Note the lack of equity and the enormous debt load. Why would anyone, especially someone as savvy as Sam Zell load up a declining…

Business

Chicago Tribune near bankruptcy

Edward Harrison Dec 7, 2008

In a shocking news story, the Wall Street Journal reports that the media company Tribune Company, which publishes the Chicago Tribune, is exploring bankruptcy. While advertising revenue has contracted significantly, impacting all major…

Peter Schiff: they laughed at him, now he’s laughing back

Edward Harrison Nov 14, 2008

I have been tied up with other activities all day today. But, I just had to send this post on Peter Schiff. My brother-in-law sent me this video a second ago of Schiff predicting doom and gloom on YouTube. And it's actually kind of funny to…

Monetary System

Reverse carry trade borrowing is deadly

Edward Harrison Oct 31, 2008

By now, you are familiar with the carry trade, where one borrows in one's own currency in order to invest in higher yielding foreign assets, often times with significant leverage. The Japanese were famous for making this trade in…

Markets

Massive short covering at VW and massive losses for hedgies

Edward Harrison Oct 28, 2008

I ran across a very disturbing news item today that is getting a lot of press in Germany. Apparently, the leveraged finance community is getting routed at the German Automaker VW. The crux of the situation is that Porsche, which controls…

Markets

Forced liquidation

Edward Harrison Oct 27, 2008

The recent movement in global markets has me scratching my head a bit. You have people dumping gold and the Swiss Franc in order to invest in the U.S. dollar and Treasury securities. Everyone says it is a flight to quality. I do not…

Markets

Dollar strength is an illusion

Edward Harrison Oct 24, 2008

I have felt for sometime that dollar strength is a counter-trend that has a sell-by date written all over it. You see, the Federal Reserve is ballooning its balance sheet like nobody's business as it tries to be the global lender of last…

Markets

Hedge funds collapsing

Edward Harrison Oct 16, 2008

CNBC and other media sources are reporting that a number of hedge funds are collapsing under the weight of poor performance and massive fund redemption. Given the market volatility in credit, sick, bond and currency markets, it was only a…

Economy

Quote of the day: Investment Bank Leverage

Edward Harrison Sep 23, 2008

With Goldman Sachs and Morgan Stanley becoming bank holding companies, the traditional U.S. investment banking model has come to an end. But it bears remembering that investment banks are highly leveraged institutions. Both Goldman…

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