Archive » Jane Merriman

Cocos - credit market classics?

Jane Merriman — Tue, 10 Nov 2009 16:56:57 +0000

"Cocos" has become the user-friendly name for a new type of hybrid bond created to help UK bank Lloyds raise money from investors to break away from a government insurance scheme for bad loans.

This nickname seems to have caught on in financial circles as it is much snappier than the bonds' official title: Enhanced Capital Notes.

The name Cocos seems to have derived from "contingent convertible," which describes one characteristic of these bonds - they convert to equity in certain circumstances.

Coco was famously the first name of French fashion designer Chanel. She was not known for her understanding of the credit markets but she did know a thing or two about fashion and the value of tradition over new-fangledness.

One senior capital markets banker pointed out these comments she made:

"Innovation! One cannot be forever innovating. I want to create classics."

Some bankers hope Cocos can become credit market classics, but admit that the jury is still out.

Who do you blame for the credit crisis?

Jane Merriman — Tue, 30 Jun 2009 11:30:55 +0000

Greedy bankers are routinely blamed for the credit crisis but one British-based poll of -- well, financiers -- spreads the blame more widely.

Gary Jenkins, head of fixed income research at Evolution Securities, wanted a more specific scapegoat and ran a poll of about 200 mostly fund managers and investors asking them to pick their credit crisis culprit. Former U.S. Federal Reserve Chairman Alan Greenspan was the clear winner, picking up 35
percent of the votes. He has been widely criticised over the past year for low interest rate policies that helped fuel the credit boom.

Former U.S. president Bill Clinton also figured quite prominently with about 10 percent of votes, and British prime minister Gordon Brown got quite a few.

Some bankers were singled out, including Fred Goodwin, former chief executive of Royal Bank of Scotland and Richard Fuld, the head of collapsed Lehman Brothers.

In a related article in Euroweek, Jenkins also had a unique culprit -- Bill Gates of Microsoft. None of the maths behind structured credit could be done without spreadsheets like Excel, Jenkins reckons.

So who do you think is to blame?

(Reuters photo: Kevin Lamarque)

Who do you blame for the credit crisis?

Jane Merriman — Tue, 30 Jun 2009 10:49:52 +0000

Bankers, politicians and regulators have taken their share of the blame for the credit crisis.

Gary Jenkins, Head of Fixed Income Research at Evolution Securities, polled about 200 investors for a more specific view on who was at fault.

Alan Greenspan, former head of the U.S. Federal Reserve, was the most popular choice, with more than a third of the votes. Other more unusual picks included the BBC's business correspondent Robert Peston and property TV show host Sarah Beeny.

If you could pick somone to blame who would it be?

Don’t mention the R word

Jane Merriman — Thu, 04 Jun 2009 17:15:55 +0000

Policitians are often scared to use the "R" word, because a recession makes them unpopular. Investment bankers dislike the "R" word too, but in this case it stands for regulation.
Regulation and lots of it is being cooked up in Washington and Brussels in response to the excessive risk-taking that helped bring on the credit crisis.
Credit derivatives are in the firing line as the bad guys of the credit crisis and derivatives in energy and commodities could get caught in the cross-fire.
Oil could also take a hit after rampant speculation was blamed for driving the price to a record of nearly $150 a barrel last year.
Although the quest to get rid of excesses is driven by good intentions, industry insiders say there will be unintended consequences and argue the regulators could have underestimated the difficulty of their task.
"It's not easy to bring back the genie into the bottle," Libya's top oil official Shokri Ghanem told the Reuters Global Energy Summit.

Meddle in commodity markets at your peril

Jane Merriman — Wed, 04 Jun 2008 17:26:05 +0000

Politicians clamouring for action to bring down high
commodity prices should be careful what they wish for.

"The running gag is the price of bread in Moscow," said
Hans-Bernd Menzel, chief executive of German power exchange EEX,
referring to state price controls.

"The price of bread was very low, but there was no bread in
Moscow."

Now Russia has a more market-oriented regime every commodity
is available at the going rate.

"I don't know of one single case where political influence
on prices has improved the situation of the people," Menzel
said.