Rolfe Winkler

Another NYC budget buster

December 1, 2008

Already, we’ve written about NY’s budget hell.  Adding to the pressure, estimated tax payments came in too heavy earlier in the year, necessitating $800 million worth of rebates through October.  According to the NYT:

Understanding “Tier 1″ capital ratios

November 30, 2008

by Rolfe Winkler, CFA

[Today on OA, a guest column by Dash Riprock.  Dash previously worked as a CDO underwriter at a U.S. brokerage house in New York.  He currently helps evaluate fixed income derivatives for banks and insurers.]

Gadhafi to the rescue

November 26, 2008

Here’s a hilarious story (via SWF Radar).  Libya has a sovereign wealth fund, and Gadhafi’s son said he wants to invest here in the U.S.:

Video: Protests in Iceland (updated)

November 25, 2008

For all of you asking: “Why all these bailouts?” Below is why.

The Iceland economy is at a standstill after the implosion of its banking system.  What caused the implosion?  A ridiculously overleveraged banking system, not unlike our own.

Out of Ammo

November 24, 2008

A good op-ed in today’s WSJ argues that the Fed is “out of ammunition” and that the fallout of this crisis, and in particular the government’s choice to fight it with unlimited guarantees, may well be the break-down of our monetary system.  It concludes with this:

Leverage by the numbers, Part 3

November 24, 2008

(Here are part 1 & part 2 in case you missed them)

Why am I excluding preferred capital?  A great question from reader Mark.  GE and GS are both on my leverage chart, and not only an I excluding the preferred capital they raised from Buffett, I’m excluding the TARP capital injections as well.  Those represented increases in “bank capital,” and yet I’m not including them in my calculation of equity in the chart.  Here’s why, from the Treasury’s press release announcing TARP:

Citi’s leverage: 280! (Leverage by the Numbers, Part 2)

November 24, 2008

As I noted in my last post, I was being charitable when I calculated leverage ratios for the big banks.  Citigroup, for instance, has $165 billion of “Other Assets” listed on their most recent balance sheet.  The company deliberately does NOT provide additional disclosure regarding what’s in that bucket, not in the quarterly OR annual filings.  But an enterprising Bloomberg reporter seems to have tracked down at least one other intangible item lurking there, the same one that Fannie/Freddie counted as “capital”:  Deferred Tax Assets (hat tip JL).

Leverage by the numbers

November 24, 2008

So what is the capital cushion underneath our largest financial institutions?  I spent today compiling this spreadsheet:

Me vs. Dick

November 22, 2008

The Financial Times’ blog FT Alphaville has me going toe-to-toe with Dick Bove.  For the uninitiated, Dick is a high-profile banking analyst, regularly interviewed on CNBC.

Intra-Day trade: Citi below $4

November 21, 2008

The stock just keeps falling.  It’s at $3.70 as I write this (see chart down and to the right, hit refresh if it doesn’t appear).

The Next Bubble is already here

November 21, 2008

And it’s in Treasuries.  Hopefully, Brad Setser doesn’t mind me borrowing one of his charts:

Citi “weighs options”

November 21, 2008

The Citigroup Death Watch continues, according to the Journal:

The sell-off in Citigroup shares has led executives to start laying out possible contingency plans. In addition to pondering a move to sell the entire company to another bank, executives have started exploring the possibility of selling off parts of the firm, including the Smith Barney retail brokerage, the global credit-card division and the transaction-services unit, which is one of Citigroup’s most lucrative and fast-growing businesses, the people said.

Yes, Virginia, Syria was building a nuclear reactor

November 21, 2008

According to a confidential IAEA report, the site in Syria bombed by Israel last year was likely a nuclear reactor:

Contemplating CAPM

November 20, 2008

—What if there’s no such thing as a risk-free asset?—

The foundation of so-called “modern” portfolio theory is the concept of diversification.  A well-constructed portfolio should have a mix of asset classes—e.g. stocks, bonds, CDs—and a mix of securities within each asset class—e.g. large cap and small cap stocks.  There’s no way to guarantee that a particular stock or bond will make you money, so better to keep your eggs in multiple baskets.  Or just buy a mutual fund.

NY budget hell

November 19, 2008

Quality of life in NYC is likely to deteriorate over the next few years as state/city governments make draconian cuts and/or raise taxes to balance their budgets.  According to the Journal: