Ma quanto ha perso Harvard?

Harvard University's admission that it lost $8 billion from its $36 billion endowment fund, as staggering as it sounds, may grossly underestimate the true magnitude of the loss between from July 1 through Oct. 31 2008. According to a source close the Harvard Management Corporation (HMC), which runs the fund for Harvard, the loss is closer to $18 billion if the losses on the fund's illiquid investment are realistically appraised.

How Much Has Harvard Really Lost?

Italia vs. UK

"Mamma mia! La crisi finanziaria ci ha reso veramente più poveri degli italiani?
[The Guardian]

«* La perdita di valore della sterlina fa crollare il Pil del Regno Unito
* I trionfalismi sono contenuti visto il profilarsi della crisi in Italia

Fu un durissimo colpo per l’orgoglio britannico, talmente devastante che qualcuno attribuì al sorpasso l’inizio della debacle che avrebbe scardinato Margaret Thatcher dal potere tre anni dopo. Nel 1987 gli italiani, che lo stereotipo vuole caotici e corrotti, annunciarono di essere più ricchi dei britannici malgrado gli otto anni di dolorose riforme imposte dai conservatori.

E indovinate un po’? L’hanno fatto ancora. Proprio mentre molti di noi erano convinti che la crisi economica non potesse peggiorare ulteriormente, ieri La Stampa affermava: “L’Italia batte l’Inghilterra [sic] con l’euro”. Il giornale sostiene che il deprezzamento della sterlina è stato così marcato che il prodotto interno del Regno Unito adesso vale meno di quello italiano. La Stampa ha calcolato che se vengono applicati i tassi di cambio di mercoledì alla ricchezza prodotta l’anno scorso, l’Italia supererebbe il Regno Unito di uno 0,7 %.

E non è tutto. “Per alcune settimane siamo stati mediamente più ricchi”, afferma il giornale. L’indicatore standard di ricchezza è il Pil pro-capite, e anche in quella voce l’Italia è davanti a noi, di circa €900 l’anno.

Per quanto faccia riflettere i britannici, gli ultimi dati hanno l’agrodolce sapore della vendetta per l’Italia, un paese il cui sorpasso fu rapidamente invertito e che, tre anni fa, fu definito “il malato d’Europa” dall’Economist a causa del proprio languore economico. Eppure, ieri, più che festeggiare il loro successo, gli italiani sembravano preoccupati.

Perfino La Stampa ha riconosciuto che “sembra assurdo in un periodo in cui i magazzini sono pieni di merci invendute e la gente non fa altro che parlare di problemi per il futuro”. Anche l’Italia è in recessione e le previsioni dicono che la sua economia sarà in calo l’anno prossimo, anche se in misura minore di quella britannica.

Sorprendentemente, Silvio Berlusconi, il Presidente del Consiglio, non ha colto quest’occasione per dimostrare l’avvedutezza delle sue politiche di governo, e il Prof. Amedeo Panci, il cui centro di ricerche Economia Reale è vicino alle posizioni della maggioranza di governo, ha dichiarato: “Francamente, non griderei al miracolo economico”. Secondo lui è stato un “fenomeno matematico, statistico”. Tito Boeri, professore di economia alla Bocconi di Milano, ha dichiarato che “il grosso problema qui è il potere d’acquisto”. Il fatto che gli italiani, così come altri cittadini dell’Eurozona, si stiano riversando su Londra per fare le spese natalizie dimostra che il calo del valore della sterlina ha provocato uno squilibrio chedev’essere compensato per poter disporre di cifre paragonabili.

“Nel 2007, quando la variazione del potere d’acquisto tra le due nazioni era pressoché la stessa, il Regno Unito era più ricco di un 15%” ha affermato Boeri”. “Poiché l’inflazione nei due paesi è stata più o meno la stessa da allora, direi che per quanto riguarda la parità dei poteri d’acquisto siamo circa allo stesso livello. Temo che la differenza sia sempre lì. E parlo da italiano che vorrebbe sentirsi più ricco.”

Sergio Rizzo, coautore di un bestseller sul graduale declino economico dell’Italia, non pensa che ci sia motivo di rivedere la propria tesi. “Negli ultimi dieci anni, tenendo conto dell’inflazione e del potere d’acquisto, l’economia del Regno Unito è cresciuta di un 55% circa, mentre per l’Italia la cifra è stata inferiore al 29%.” Rizzo ha elencato le ragioni per cui l’Italia è il fanalino di coda dell’eurozona. “La malavita controlla una grossa parte del Sud, e proprio per questo il Mezzogiorno attira meno dell’uno per cento degli investimenti esteri,” afferma Rizzo. “La giustizia è lenta, per cui i creditori, di regola, aspettano dieci anni prima di riavere i propri soldi dalle aziende fallite, e la frase “allora fammi causa” è diventata la risposta universale nei confronti delle richieste dei creditori. La nostra pubblica amministrazione è inefficiente, poco informatizzata e sprecona”.

Tuttavia, Panci pensa che la sorpresa del “ri-sorpasso” aiuterà a puntare i riflettori sui punti di forza trascurati dell’economia italiana, che le potrebbero permette di superare la recessione mondiale meglio d’altri paesi, Regno Unito compreso. “Il nostro sistema bancario, ad esempio, è stato criticato a lungo per non essere abbastanza intraprendente e per avere delle regole troppo rigide. Ma per ora è riuscito ad affrontare benissimo la crisi”, ha dichiarato. Qualche settimana fa Berlusconi ha notato che l’Italia, pur avendo un debito pubblico elevato (in effetti supera il prodotto interno annuale), ha un livello d’indebitamento privato basso, e ciò è dovuto al fatto che, storicamente, gli italiani sono votati al risparmio. “Il debito complessivo è più basso di quello degli Stati Uniti o del Regno Unito - un fatto positivo che dovrebbe essere apprezzato maggiormente”, ha dichiarato. Egli è fiducioso che l’intraprendenza e l’industriosità dei suoi connazionali tirerà loro fuori dalla crisi. Ha dichiarato che sono come le “formiche virtuose”».

REGNO UNITO CONTRO ITALIA

REGNO UNITO

Insegnante €32,206
Dottore €78,140
Infermiera €25,161
Macchinista €41,525
Cappuccino €2.42
Pizza Margherita €6.05
Big Mac €2.20
Borsetta Prada nera €610
Coppe del mondo 1

ITALIA

Insegnante €30,571
Dottore €55,944
Infermiera €23,121
Macchinista €28,760
Cappuccino €2.50
Pizza margherita, €9.00
Big Mac €3.40
Borsetta Prada nera €780
Coppe del mondo 4

Italia dall'estero

Prevedibilmente Irrazionale

Un consiglio per le letture delle vacanze: Dan Ariely, Prevedibilmente Irrazionale, Rizzoli.

"Tutti siamo convinti di essere razionali. Nessuno di noi lo è. E al contrario di quanto dicono le teorie economiche tradizionali, non siamo capaci di scegliere tra diverse alternative calcolando il valore di tutte le opzioni che abbiamo di fronte. Altrimenti perché ci ripromettiamo tanto spesso di metterci a dieta, solo per veder svanire il nostro proposito all’avvicinarsi del carrello dei dessert? Perché ci ritroviamo ad acquistare oggetti che non vogliamo solo per avere un omaggio che non ci serve? E perché dopo aver preso un’aspirina da un centesimo continuiamo ad avere mal di testa, mentre ci passa subito se la medicina costa cinque volte tanto?

Dan Ariely, uno dei massimi esperti mondiali di economia cognitiva e comportamentale, è convinto che noi non siamo solo irrazionali, ma che lo siamo in modo prevedibile: ovvero in situazioni analoghe tendiamo a seguire gli stessi, tortuosi, percorsi mentali. E a operare scelte che nulla hanno a che vedere con la logica.

Ariely, ustionato in un attacco terroristico, ha dovuto subire le conseguenze delle “decisioni irrazionali” prese dalle infermiere che gli strappavano i cerotti. E proprio partendo dalla sua esperienza dimostra, in una carrellata di esperimenti divertenti e sorprendenti, che siamo animali più emotivi che ragionevoli. Dal sesso agli esami di matematica, dal sorseggiare una birra all’acquistare libri su Internet, ogni gesto che facciamo è soggetto all’azione di forze diverse: emozioni, aspettative, relatività, norme sociali. Certo, capire in che modo il corpo e il cervello che crediamo di conoscere funzionano “a nostra insaputa” non farà immediatamente di noi algidi e astuti calcolatori. Ma ci aiuterà almeno a sfuggire ad alcuni dei nostri più clamorosi errori quotidiani, soprattutto quelli indotti da chi vuole sfruttare la nostra prevedibile irrazionalità".

The Madoff Economy

The Madoff Economy by Paul Krugman

Il patrimonio della FED post Lehman

Nella tabella qui accanto gli effetti del fallimento della Lehman sul patrimonio della FED. Da notare la ricomposizione del patrimonio con la discesa dei titoli di stato e l'importante aumento della dimensione complessiva.

La freccia grande indica il fallimento di LEH.

Banque du Canada

Lehman and Federal Reserve Assets

Quant'è dura liquidare Lehman!

The Man Who Is Unwinding Lehman Brothers

One Benefit of Recessions: Exposing Madoffs of the World

Il Dopo Madoff potrebbe avere anche degli effetti positivi secondo Phil Izzo

«One Benefit of Recessions: Exposing Madoffs of the World

The financial crisis may get to take credit for the downfall of Bernard Madoff, and more scams may come to light as some of what John Kenneth Galbraith called “the bezzle” works its way out of the system.


A bigger contributor to the bezzle than Galbraith could have imagined. (European Pressphoto Agency)

In his 1954 book “The Great Crash of 1929,” Galbraith wrote, “At any given time there exists an inventory of undiscovered embezzlement in — or more precisely not in — the country’s business and banks. This inventory — it should perhaps be called the bezzle — amounts at any moment to many millions of dollars. It also varies in size with the business cycle.”

Galbraith said that in good times (he was discussing the 1920s but it applies in the case of Madoff in the early 2000s) the bezzle grows by a combination of greed and more lax oversight. But “In a depression all this is reversed. Money is watched with a narrow suspicious eye,” he said.

Diminishing trust is bad for bank lending and the movement of credit in the economy, but it is a boon for ferreting out embezzlement and other financial crimes. “Should the American economy ever achieve permanent full employment and prosperity, firms should look well to their auditors,” Galbraith wrote. “One of the uses of depression is the exposure of what auditors fail to find.”».

WSJ.com

Gli hedge funds e la due diligence

Dopo Madoff gli hedge sono sotto accusa per non aver affettuato una approfondita due diligence.

Ecco cosa ne pensano John Hempton e Robert Peston.

Krugman risponde a Cowen

Big Three vicine all'auspicabile fallimento?

The White House said Thursday it was considering an “orderly” bankruptcy for stricken US automakers GM and Chrysler. A Bush spokesman said the president and Treasury Secretary Hank Paulson were considering the step as part of an overall rescue package for the two carmakers, which have said they need an emergency $15bn to continue operations until end-March, and were “very close” to a decision. The two options were tapping the Treasury’s TARP scheme for the funds, and “one of these bankruptcies”, the spokesman said.

http://ftalphaville.ft.com/

Pensa positivo

"Consider:

• Exposure of Italian banks to the subprime mortgage market was negligible, and
  
  
• Exposure of Italian banks to CDS contracts is equally small; the Bank of Italy claims Italian Banks represent only 1 percent of the G-10 nations’ overall derivative exposure.
  
  
• In 2002, former Central Bank Governor, Antonio Fazio, pushed Italy’s banks into a more conservativefunding posture, forcing them to issue longer dated debt maturities, and thereby avert the more widespread, speculative funding tendencies then popular among Europe’s big banks.

The result: a lower return on equity, but increased financial stability.

In short: the Italian financial system may be less “advanced” in a corporate sense, but its belated development appears to have saved it from the disaster that afflicted other western banking systems.  It currently looks poised to reap the benefits of an imminent market rebound".

Italy: A Sick Man, Yes – but So Well Dressed!

La SEC sotto accusa per il caso Madoff

The SEC's fiscal year 2008 authorized spending budget: $906 million.

The estimated financial toll from the alleged Madoff swindle: $50 billion.

The price of regulatory reform? At this point, probably worth the money.

As details continue to emerge in the prosecution of brokerage chief Bernard Madoff's alleged $50 billion Ponzi scheme, the Securities and Exchange Commission has gone on the defensive.

Critics have long argued that the agency, which sees enforcement of federal securities laws as its primary mission, lacks the teeth to stop financial fraud in its tracks and should be abolished or fundamentally changed.

SEC Chairman Christopher Cox said Tuesday and again on Wednesday that the agency would investigate its own failure to investigate Madoff. The SEC had been tipped as early as 1999 that Madoff, a former Nasdaq chairman and fixture on Wall Street for decades, was running his private investment vehicles as a Ponzi scheme. The SEC sent examiners to the firm twice, including an enforcement team last year, but came up with nothing.

Worse, since no subpoena power was requested, the SEC conducted its investigations with documents provided by Madoff, and now it appears he kept an extensive collection of books and false records, Cox said Tuesday.

Cox can't even guarantee that there aren't more problems like this Madoff scheme out there. "We say that a rising tide lifts all boats," Cox said at a press conference Wednesday. "When the economic tide goes out, some of the skeletons that wash up on shore are Ponzi schemes such as this one. So one of the ways that these things are unhappily discovered is the roof falls in because of market conditions. "

That addresses one of the key criticisms of the SEC, a 70-year-old agency established by President Roosevelt in the 1930s in response to the market abuses that preceded the Crash of 1929: It is reactionary.

"They fell asleep at the switch and it won't be the first time," says Anthony Sabino, a law and business professor at St. John's University.

Sabino says the SEC needs 25% more money and a lot more resources to do its job. "They are the most underfunded agency in the federal system," he says.

So far this year the SEC has endured withering criticism of its failure to keep tabs on the liquidity positions of major investment banks and its monitoring of trading abuses like naked short-selling. Now it has stumbled on another core competence: fraud detection.

In its annual report, the SEC cites 671 enforcement actions in fiscal year 2008. Insider trading actions increased 25% and market manipulation actions increased 45%. Between 2004 and 2008, the SEC has ordered $12.9 billion of penalties and disgorgement.

The largest group of its 3,500 employees is assigned to enforcement (1,169), after that compliance (807) and corporate finance (175). More than half the budget, $595 million, was spent on enforcing compliance with federal securities laws, the annual report says.

Madoff, a 70-year-old investment adviser who also heads a market making brokerage firm, was arrested last Thursday and charged with fraud in a scheme that has left hundreds of wealthy and seemingly sophisticated investors, including charities, with nothing.

Already, lawmakers are lining up to schedule the inevitable hearings into why no one picked up on the fraud before now, especially since the SEC admits it had compelling evidence since at least 1999 that something wasn't quite right at the firm Bernie Madoff ran.

Paul Kanjorski, a Pennsylvania Democrat, is one of them. On Wednesday he promised hearings in January on the matter by the House Financial Services Subcommittee. "Before we act on legislation in the 111th Congress to restructure the regulatory system for the financial services industry and enhance investor protection, we need to understand how Mr. Madoff organized his many business operations and how he perpetrated these frauds," Kanjorski said.

Forbes.com

Chrysler interrompe la produzione negli Stati Uniti per un mese

Chrysler LLC announced late Wednesday that it is stopping all vehicle production in the United States for at least a month.

All 30 of the carmaker's plants will close after the last shift on Friday, and employees will not be asked to return to work before Jan. 19.

Chrysler blamed the "continued lack of consumer credit for the American car buyer" for the slow-down in sales that forced the move.

Money.cnn.com

Le vittime di Bernie

Ecco una prima lista dei truffati.

WSJ.com

ZIRP!

That’s zero interest rate policy. And it has arrived. America has turned Japanese.

This is the thing I’ve been afraid of ever since I realized that Japan really was in the dreaded, possibly mythical liquidity trap. You can read my 1998 Brookings Paper on the issue here.

Incidentally, there were a bunch of us at Princeton worrying about the Japan problem in the early years of this decade. I was one; Lars Svensson, currently at Sweden’s Riksbank, was another; a third was a guy named Ben Bernanke. I wonder whatever happened to him?

Seriously, we are in very deep trouble. Getting out of this will require a lot of creativity, and maybe some luck too.

http://krugman.blogs.nytimes.com/

Cos'è un hedge fund?

A look inside hedge funds from Marketplace on Vimeo.

La SEC ammette le proprie colpe sul caso Madoff

Christopher Cox, the SEC chairman, has called for an investigation of his own agency, acknowledging multiple failures to investigate allegations of wrongdoing by Bernard Madoff. 

Cox’s comments came amid widespread criticism of the SEC for failing to detect Madoff’s alleged $50bn “Ponzi” scheme. Separately, the FT reports that US officials said Madoff left behind a trail of “falsified” and “unreliable” records, hampering efforts by investigators to unravel his alleged fraud.

http://ftalphaville.ft.com/

Goldman Sachs in rosso per la prima volta dopo l'IPO

Goldman Sachs Group ha annunciato ieri una perdita, nel quarto trimestre, pari a $2,12 miliardi. È la prima volta da quando è stata quotata nel 1999.

Goldman Sachs Posts First Loss Since Going Public

Qualcuno si era anche accorto che Madoff era inaffidabile

Hedge fund investment adviser Aksia LLC warned clients not to put their money with Bernard Madoff after learning of “red flags” at his company, including that its books were audited by a three-person accounting firm.

Bernard L. Madoff Investment Securities LLC used Friehling & Horowitz, an auditor operating out of a 13-by-18 foot location in an office park in New York City’s northern suburbs. Madoff was charged by federal prosecutors on Dec. 11 with running what he said was a $50 billion Ponzi scheme. The auditor signed off on Madoff’s annual financial statement through Oct. 31, 2006, according to a copy obtained by Bloomberg News.

New York-based Aksia urged clients last year not to invest with Madoff’s firm after learning the identity of the New City, New York-based auditor, according to Jake Walthour, head of advisory services at Aksia. Friehling & Horowitz included one partner in his late 70s who lives in Florida, a secretary, and one active accountant, Aksia said.

“Our judgment was swift given the extensive list of red flags,” Aksia wrote Dec. 11 in a letter to clients".

Bloomberg.com

Il buco nero

Felix Salmon su Madoff

Don't Call It A Hedge Fund

L'Ecuador annuncia il proprio default

L'Ecuador diventa il primo Stato a dichiarare il proprio default nell'attuale crisi creditizia, ma pare che la ragione risieda in una manovra politica del Presidente Rafael Correa più che in una mancanza di liquidità.

The Australian

No crac. Scopri l'economista che è in te

Un libro da leggere durante le prossime vacanza di Natale.

No crac. Scopri l'economista che è in te
di Tyler Cowen, editor del blog Marginal Revolution 

"Si può evitare il crac economico in casa propria? E salvaguardare i propri valori? Nella vita quotidiana, è possibile interrompere un logorroico senza ferirlo o fare bella figura mentre si viene torturati? La risposta a tutte queste domande è sì: quella vecchia scienza indigesta dell'economia può aiutarci non solo, e non tanto, ad aumentare i nostri profitti o sopravvivere alla grande depressione, ma soprattutto può renderci la vita migliore. L'economia, infatti, consente di comprendere mercati di tutti i generi, di individuare incentivi che guidano il comportamento umano e di sfruttare al meglio lo scambio di valori. Questo libro rivela come usare i principi economici di base per ottenere di più da quello che si desidera".

Madoff: una prima conta dei feriti

Anche Hsbc è tra le principali vittime del crack Madoff. Il gruppo bancario britannico ha ufficializzato l'esposizione per circa un miliardo di dollari nella frode da 50 miliardi di dollari architettata da Bernard Madoff, ex presidente del Nasdaq, caso che tiene con il fiato sospeso i mercati finanziari europei. Gli annunci delle banche che danno i numeri della loro esposizione si susseguono. E l'andamento dei titoli ne risente.

L'esposizione diretta di Hsbc è di «circa un miliardo di dollari», la cifra più alta tra quelle rese note dagli istituti. Solo il Santander ha 'denunciato' un importo maggiore (2,33 miliardi di euro) ma riguarda l'esposizione dei clienti del proprio hedge fund Optimal.

La situazione italiana. In Italia la Consob ha avviato una serie di accertamenti finalizzati proprio a valutare l'impatto del crac sul sistema finanziario italiano. Unicredit ha comunicato di avere un'esposizione propria di circa 75 milioni di euro. «Relativamente alla divisione di asset management Pioneer Investments - dice il comunicato - UniCredit conferma che alcuni fondi della sua unità dedicata agli investimenti alternativi sono esposti a Madoff indirettamente tramite feeder funds.» Questi ultimi «non sono tuttavia presenti in alcun portafoglio dei fondi di fondi hedge di diritto italiano». Pertanto, «l'esposizione dei clienti italiani è pari a zero». Banco Popolare in mattinata è invece in netto calo a Piazza Affari sulle incertezze legate alla possibile esposizione. Secondo quanto riportato da «Il Sole 24 Ore» di sabato, Aletti Gestielle (controllata dal Banco Popolare) sarebbe tra i clienti di Union Bancaire Privèe, gruppo tra i più esposti in Europa sugli strumenti del fondo Madoff. La banca, in un comunicato, ha sottolineato che Aletti Gestielle Alternative ha esclusivamente una esposizione indiretta su Madoff tramite fondi feeder inseriti nei propri fondi di fondi hedge. Il fallimento del Fondo Madoff, dunque, comporterà una perdita massima, relativa al patrimonio del Banco Popolare, non superiore - al cambio attuale - a 8 milioni di euro. La perdita massima sui fondi distribuiti alla clientela istituzionale e private ammonta a circa 60 milioni. Generali ha invece confermato le indiscrezioni dell'agenzia di stampa «Radiocor-Il Sole 24 Ore»: l'istituto non ha alcuna esposizione.

Le banche europee. Sono molte le banche europee esposte. Tra queste troviamo il Santander, Bnp Paribas, Rbs, Natixis. La britannica Royal Bank of Scotland fa sapere che le sue perdite potenziali legate allo scandalo sono di 400 milioni sterline (450 milioni di euro). La spagnola Santander ieri ha detto che i clienti di Optimal, il suo hedge fund, sono esposti per addirittura 2,33 miliardi di euro. La banca spagnola Bbva, la seconda del Paese, non ha invece investimenti diretti in asset del truffatore statunitense, ma potrebbe avere «circa 300 milioni di euro di perdite» se alcuni fondi Madoff si rivelassero del tutto privi di valore. Bbva ha infatti agito su questi fondi solo come gestore per conto di altre banche e investitori istituzionali. La francese Bnp Paribas annuncia possibili perdite per 350 milioni di euro. Anche la banca d'investimento francese Natixis, controllata dalla Caisse d'Epargne e dalla Banque Populaire, rischia di perdere 450 milioni di euro. L'esposizione di Union Bancaire Privèe (Ubp) rappresenta invece meno dell'1% del totale degli asset in gestione. La solidità finanziaria della banca è ai livelli più alti - spiega Ubp in un comunicato - «non solo Ubp ha un Tier 1 ratio del 16% in termini di shareholder equity, il doppio rispetto al minimo legale richiesto dell'8%, ma lo stato patrimoniale ha mostrato una struttura costante per diversi anni, senza investimenti a rischio».

Il gruppo britannico Hsbc ha confermato lunedì pomeriggio di essere esposto per circa un miliardo di dollari. In una nota diffusa alla Borsa di Londra il gruppo bancario britannico ha detto di avere fornito finanziamenti a un ristretto numero di clienti istituzionali che hanno investito con Madoff. Il fondo d'investimento britannico Man Group invece presenta una esposizione di 360 milioni di dollari e quello giapponese Nomura ammette un'esposizione di 27,5 miliardi di yen (302 milioni di dollari). Axa ha invece fatto sapere che la sua esposizione netta «è molto inferiore» ai 100 milioni di euro. Il gruppo Credit Agricole Sa ha invece un'esposizione inferiore a 10 milioni di euro.

Ilsole24ore.com

Madoff parla di Madoff

9min:30secs - Madoff descrive l'inizio della sua "carriera".

24min:50secs - Su Wall St "By benefiting one person, you are disadvantaging another person".

28min:30 secs - Come fare soldi? "By taking risk"

30min:37secs - "In today's regulatory environment it's almost impossible to break the rules ... It's impossible for a violation to undetected, certainly not for a considerable period of time".

Youtube.com

Electrolux annuncia il licenziamento di 3.000 persone

As a result of weakening demand for appliances in the two last weeks of November and in December, Electrolux will not reach its outlook for the full year of 2008. In light of the sharp market decline, Electrolux is reducing the number of employees by more than 3,000 in the fourth quarter of 2008 and in 2009.

Demand for appliances in Europe and North America declined considerably in the two last weeks of November. The weak market has had a negative impact on Electrolux sales volumes and product mix during the fourth quarter.

As of November 2008, operating income, excluding items affecting comparability, amounted to approximately SEK 2.7 billion. In December, demand for appliances in Europe and North America continues to show a sharp decline. As sales in December are seasonally low, there is a risk that operating income for the month will be slightly negative.

As a consequence of these negative developments for the fourth quarter, it is no longer possible to achieve the outlook of an operating income in 2008 of SEK 3.3 - 3.9 billion, excluding items affecting comparability.

Electrolux has throughout 2008 introduced a number of cost-saving activities, including reduction of the number of employees. Due to the negative development on the main markets, cost-saving activities will be further intensified. Measures have been launched to reduce the number of employees by more than 3,000 in the fourth quarter of 2008 and continue in 2009. All operations on a global basis are affected. The costs for these actions are approximately SEK 1.2 billion, and will be charged against operating income before items affecting comparability in the fourth quarter of 2008. The savings are expected to amount to approximately SEK 1.1 billion on a yearly basis, with full effect as of 2010.

In addition to these activities, Electrolux continues to move production capacity to low-cost countries in accordance with the restructuring program launched in 2004. The program, which will be completed in 2009 and 2010, will further reduce the number of employees.

Electrolux.com

Ponzi scheme

Ci mancava anche questa: un Ponzi scheme nel bel mezzo della crisi.

Il crack degli hedge fund gestiti dall'ex presidente del Nasdaq Bernard Madoff hanno aperto una voragine che si presume essere pari a 50 miliardi di dollari.

Ora, scatta la conta dei morti e dei feriti.

WSJ.com

Stiglitz su Vanity Fair

Stiglitz traccia un primo resoconto degli errori che hanno condotto gli Stati Uniti nell'attuale situazione di crisi:

a) la nomina di Greenspan a capo della FED nel 1987;

b) il disinteresse della FED alla regolamentazione dei derivati;

 

c) l'abolizione dello Glass-Steagall Act nel mese di novembre del 1999;

d) la decisione della SEC nell'aprile del 2004 di aumentare il rapporto capitale/debito per le investment banks (da 12:1 a 30:1);

e) i tagli alle tasse nel 2001 con particolare riferimento alla rendite finanziarie e alla deducibilità degli interessi;  

f) le stock option e gli effetti perversi sul contabilità delle imprese;

g) le agenzie di rating e i conflitti di interessi;

h) il piano Paulson dell'ottobre 2008. 

Capitalist fools

Un nuovo capitalismo si affaccia all'orizzonte?

Secondo Robert Peston  siamo all'alba di un nuovo capitalismo.

«The contraction of the world's developed economies that we're witnessing represents the end of an era. Taxpayers have been forced to support the banking system and the real economy on a scale we've never seen before.

For many years to come, what's happening will affect the relationship between business and government, between taxpayers and the private sector, between employers and employees, between investors and companies.

A new capitalism will emerge from the rubble».

The New Capitalism

Un Paese immune alla crisi: il Libano

«Deep down in the basement of Lebanon's Central bank treasury vaults are full. Cash has been flowing in like never before, Lebanese banks are posting record deposits and bankers say this is the best year in Lebanon's financial history.

According to the country's chief banker all of this is because while the world was shocked when in September the banking giants began to wobble, Lebanon was prepared.

"I saw the crisis coming and I told the commercial banks in 2007 to get out of all international investments related to the international markets", says Riad Salameh, the governor of Lebanon's Central Bank.

There is a tradition of conservative regulation at the Central Bank in Lebanon, which kept the banks safe.

Banks weren't allowed to take on too much debt and they had to have at least 30% of their assets in cash.

They were not allowed to speculate in risky packages of bundled up debts.

And weak banks were forced to merge with bigger ones before they got into trouble.

"You could have thought they had a crystal ball. It was very wise of the Lebanese regulators not to get involved in all these risky international investments that turned out to be the doom of many banking systems," says Edward Gardner of the International Monetary Fund».

BBC News

Dan Ariely: una diversa visione della crisi dei subprime

Le preoccupazioni di Krugman

"Worries about next year

I’ve been ruminating over economic prospects for next year, and I’m getting scared.

Two points:

1. The economy is falling fast. We’ll see what tomorrow’s employment report says, but we could well be losing jobs at a rate of 450,000 or 500,000 a month.

2. Infrastructure spending will take time to get going — a new Goldman Sachs report suggests that projects that are “shovel-ready” are probably only a few tens of billions worth, and that a larger effort would take much of a year to get going. Meanwhile, it’s very questionable how much effect tax rebates will have on consumer demand. So it may be hard for stimulus to get much traction until late 2009 — and that’s even if Congress goes along, which may be a problem given all the bad analysis and disinformation out there.

So here’s what I’m wondering: will it, in fact, even be possible to pull the economy out of its nosedive before unemployment goes into double digits? I’m starting to wonder".

The Conscience of a Liberal

L'ottimismo è il profumo della vita!

"Comprate BoT e CcT italiani, sono i migliori". Lo ha detto il ministro dell'Economia, Giulio Tremonti, intervistato a Porta a Porta. Per il ministro l'acquisto di titoli pubblici italiani "è la cosa più sicura e più solida" in questo momento.

Ilsole24ore.com

I prezzi dei CDS sui Titoli di Stato continuano a salire

"Credit default swaps, which insure against bond defaults, rose to all-time highs on the US, UK, France, Spain, Italy and Germany yesterday. (...)

Italy is considered the biggest concern among other rich nations. Its CDS price is the highest among the Group of Seven nations, standing at 161 basis points, or €161,000 ($204,000) to insure €10m of debt over five years.

Investors are concerned that Italy's debt to gross domestic product ratio has jumped to 103 per cent - the highest in the eurozone. Many analysts forecast it will rise further by the end of next year".

FT.com

Titoli di Stato: anche il Governo inizia a lanciare segnali di allarme

Tremonti preoccupato per il mercato finanziario e per i titoli di Stato. E il ministro Sacconi alza il livello dell'allarme parlando di un rischio bancarotta per il Paese, certo "non probabile, ma non impossibile".

Non è tanto il patto di stabilità, dunque, a preoccupare il ministro dell'Economia, Giulio Tremonti, ma il mercato finanziario. La politica economica italiana deve essere dettata dalla ''prudenza'' perché ''il nostro Paese ha il terzo debito pubblico del mondo e questo debito sarà in competizione con le emissioni crescenti fatti da altri Paesi a sostegno delle ricapitalizzazioni bancarie''.

Per mantenere la credibilità sul mercato finanziario, avverte dunque il ministro dell'Economia, "l'impegno, non dico del governo, ma della Repubblica italiana è di non aumentare il debito".

Considerazioni preoccupanti, che si traducono in allarme con le affermazioni del ministro del Welfare Maurizio Sacconi. Nello spiegare che non esistono dissidi con il suo collega all'Economia, Sacconi aggiunge di essere anche lui "preoccupato per il rischio di default del Paese. E c'è - ha proseguito - qualcosa di peggiore della recessione che è la bancarotta dello Stato, una ipotesi improbabile ma comunque possibile".

Sacconi, nel corso del suo intervento, ha inoltre sottolineato come "non possiamo permetterci neanche lontanamente che vada deserta un'asta pubblica di titoli di Stato. Ci sarebbe una carenza di liquidità per pagare pensione e stipendi e faremmo come l'Argentina".

Repubblica.it

Al bando le partecipazioni occulte

Nella dura battaglia che Porsche conduce da tempo per la conquista di Volkswagen si è di nuovo visto l’occultamento di partecipazione rilevanti tramite l’uso di derivati su azioni.

In questo caso, più che in altre occasioni, l’utilizzo di tali strumenti ha sollevato roventi polemiche. Ciò per la semplice ragione che si è verificata una distorsione del prezzo delle azioni di VW davvero sorprendente: in soli due giorni il prezzo è cresciuto di oltre il 300%.

La causa scatenante di tale improvviso rialzo è stata la drammatica riduzione del flottante di VW, che ha spinto coloro che avevano chiesto in prestito azioni VW, sperando in un loro ribasso (la settimana precedente avevano perso il 50%), a riacquistarle a un prezzo di gran lunga superiore a quello per cui le avevano vendute in precedenza, riportando in tal modo, in due giorni, perdite stimate tra i 3 e i 20 miliardi di Euro. Si è così ripresentato sul mercato azionario, dopo decenni (l’ultimo era avvenuto nel 1923), un market corner ([1]).

Per determinare tale effetto distorsivo è bastato che Porsche comunicasse al pubblico di aver in portafoglio derivati su azioni (cash settled options) per circa il 31% di azioni Volkswagen. L’incertezza che regna sovrana rispetto a tali derivati su azioni ha fatto il resto e il primo giorno di mercato aperto successivo all’annuncio si è verificato il market corner.

I market corner per la cronaca hanno avuto il loro momento di gloria tra la fine del XIX secolo e gli anni venti del secolo scorso, per poi scomparire dal mercato azionario ([2]). Una delle innovazioni regolamentari che ha portato alla loro estinzione è stata la riduzione dell’opacità del flottante. All’epoca del fiorire dei market corner, non vi era pressoché alcuna informazione sulle partecipazioni rilevanti, era così facile cadere in errore circa la misura del flottante e credere che questo fosse maggiore rispetto alla realtà.

Da allora la situazione regolamentare è profondamente mutata. Nel tempo sono stati introdotti stringenti obblighi di trasparenza circa le partecipazioni rilevanti e il flottante.

Nonostante ciò, permangono degli angoli da illuminare e tra questi vi sono alcuni derivati azionari, che offrono la possibilità di occultare rilevanti posizioni potenziali. Tali strumenti sono stati utilizzati di recente, oltreché da Porsche, anche in altre discusse operazioni. Ricordiamo, nell’ordine, in Nuova Zelanda la vicenda Perry-Rubicon che ha dato luogo a un fenomeno di empty voting (2003) in Italia il caso Ifil/Exor in cui l’obbiettivo era mantenere il controllo di FIAT (2005), in Germania il takeover di Schaeffler su Continental (2008) e l’attacco a Deutsche Börse da parte di alcuni hedge funds (2005) e negli Stati Uniti la proxy fight tra CSX e sempre alcuni hedge funds (2008) ([3]).

A seguito della vicenda Porsche – Volkswagen è però oramai chiaro che non più essere ulteriormente rimandato un intervento regolamentare al fine di ridurre le asimmetrie informative, di assicurare la regolare formazione dei prezzi, di agevolare il mercato del controllo societario e in conseguenza di rafforzare la fiducia nei mercati (nonché, come dimostrato nel market corner di VW, di evitare gravi distorsioni del mercato).

La materia è attualmente oggetto di riforma in Italia nell’ambito del recepimento della Direttiva Transparency, la quale, tuttavia, fa obbligo di comunicazione unicamente rispetto ai derivati con consegna fisica dei titoli (cd. physical settlement), così come prevedono le disposizioni attualmente in vigore nel nostro Paese.

La Consob, nel documento di consultazione pubblicato di recente, mette correttamente in luce le problematiche relative a tali strumenti, ma pare riservarsi di intervenire in un secondo momento con una consultazione ad hoc.

È invece auspicabile che l’Autorità di controllo intervenga senza ulteriori esitazioni dettando un quadro regolamentare che guardi alla sostanza più che alla forma, così come sta facendo in questi giorni la FSA nel Regno Unito, che ha deciso di estendere gli obblighi di disclosure ai derivati che prevedono un reale e diretto interesse nelle azioni sottostanti (“similar economic effect to a qualifying financial instrument”), ove per reale e diretto interesse si intende l’esercizio del diritto di voto, l’acquisto delle azioni sottostanti o entrambi.

Nella speranza che tali interventi su base domestica possano anche spronare il legislatore comunitario a intervenire senza indugio per ridurre quanto più possibile la possibilità di occultare partecipazioni rilevanti, che, come abbiamo visto, possono avere anche gravi effetti distorsivi sui mercati finanziari.


([1]) ALLEN, LITOV e JIANPING, Large Investors, Price Manipulation, and Limits to Arbitrage: An Anatomy of of Marker Corners, http://ssrn.com/abstract=604302

([2]) Alcuni market corner recenti riguardano bond governativi (Citigroup/ Eurozone bonds nel 2004; Salomon Brothers/two-year U.S. Treasury notes nel 1991) e commodities (rame nel 1996; argento nel 1980).

([3]) In quest’ultimo caso, la vicenda è approdata innanzi alla District Court for the Southern District of New York, la quale ha ritenuto gli hedge funds inadempimenti rispetto agli obblighi di comunicazione delle partecipazioni rilevanti.

La fusione tra BofA e Merril Lynch

Il 5 dicembre è previsto il voto sulla fusione tra Bank Of America e Merrill Lynch.

Bank of America and Merrill Lynch merger proxy

La seconda tranche del TARP

Secondo il Wall Street Journal Paulson è in procinto di bussare alle porte del Congresso per richiedere lo sblocco della seconda tranche del TARP, ma intanto il Government Accountability Office critica il Tesoro circa la attuale gestione del TARP.

Un altro trimestre in rosso per Goldman Sachs e Morgan Stanley

Nightmare on Wall Street continues

City si vende gli aerei

Per chi fosse interessato a un Dassault Falcon 900 full optional.

Citylife.com

Gli analisti ammettono (forse per la prima volta) di non essere in grado di prevedere i risultati delle imprese

«Analysts at Goldman Sachs JB Were have written a remarkably honest confession to their clients about why analysts keep getting profit forecasts wrong in a downturn like this. (...)

Here is a summary of the four reasons they cite:

– They haven’t seen anything like this before – that is, “the paucity of financial crises … in recent history” means they tend to “underestimate the effects of systematic or top-down developments”.

– The companies haven’t seen anything like this before. A survey of analysts reveals that 25 per cent of companies that used to provide profit guidance no longer do (and guidance is all-important – see the next point, below). CEOs, they say, are chosen for their “left brain skills: optimism, ambition, hard work, focus and decisiveness. Patience and an appreciation of history are not considered virtues for these individuals".

– Analysts “seek to curry favour with management in order to preserve their information networks". Everyone knew this already, but it’s the first time I’ve seen it admitted.

– Analysts need to manage their “reputational risks”, so they “engage in herding behaviour”. That is, the costs of getting a big call wrong far outweigh the benefits of getting a big one right.»

Business Spectator

Il costo dei CDS sul debito nostrano continua a crescere

Five-year Italian government CDS widened to 161.5 basis points from 155 basis points at Monday's close, while the French equivalent reached a record 56.8 basis points from Monday's 54.4 basis points.

(...)

The move was most severe in Greek, Irish and Italian CDS, with 5-year Irish CDS having blown out almost seven-fold to 213.4 basis points on Tuesday compared with levels seen mid-September when the global financial crisis reached new depths with the collapse of Lehman Brothers.

Five-year CDS on Italian government debt widened from 47 basis points on Sept. 16, with similar moves from double digit to triple seen in CDS on UK and Swedish sovereign paper, according to CMA DataVision.

"In our opinion, the Italian budget will veer into unsustainability in 2009. By unsustainable we mean new debt issuance will be required to cover the interest payments in 2009. The same problem is likely to recur in 2010 as well," Chapman at UBS said.

"We also believe the average Italian state debt service cost is not likely to fall much from recent 4.4 percent unless the duration of the portfolio shrinks much more than we expect. In fact, the duration has been extending in recent years."

Italian and Greek government bonds have also cheapened sharply, with their yield premium over benchmark German Bunds soaring well over 100 basis points as investors switched into safer haven German assets. (...)

Reuters.com

I dati del mercato dell'auto negli USA a novembre

Ford - 30.6%;
Toyota - 33.9%.
Honda - 31.6%
Volvo - 46.5%
Chrysler - 47%
GM - 41%

The Big Picture

Mercato dell'auto: -30% a novembre

In Italia crollano le immatricolazioni delle auto in novembre: -29,46 per cento, rispetto allo stesso periodo di un anno prima a 138.352 unità. Lo comunica il ministero delle Infrastrutture e dei Trasporti, precisando che per i trasferimenti di proprietà di auto usate la flessione è del 12,45% a 394.667.

Ilsole24ore.com

Il quartetto degli orsi

Chi voleva uccidere Morgan Stanley?

Sul Wall Street Journal è stata pubblicata una ricostruzione degli ultimi giorni di settembre in cui anche Morgan Stanley sembrava destinata a sparire come Lehman. 

Una storia torbida che ha come protagonisti alcuni dei principali concorrenti di MS, gli short sellers, i rumors e le  movimentazioni inusuali dei CDS relativi a MS.

Anatomy of the Morgan Stanley Panic

Two days after Lehman Brothers Holdings Inc. sought bankruptcy protection, an explosive rumor spread that another big Wall Street firm, Morgan Stanley, was on the brink of failure. The chatter on trading desks that Sept. 17 was that Deutsche Bank AG had yanked a $25 billion credit line to the firm.

John Mack

That wasn't true, but it helped trigger a cascade of bearish bets against Morgan Stanley. Chief Executive Officer John Mack complained bitterly that profit-hungry traders were sowing panic. Yet he lacked a critical piece of information: Who exactly was behind those damaging trades?

Trading records reviewed by The Wall Street Journal now provide a partial answer. It turns out that some of the biggest names on Wall Street -- Merrill Lynch & Co., Citigroup Inc., Deutsche Bank and UBS AG -- were placing large bets against Morgan Stanley, the records indicate. They did so using complicated financial instruments called credit-default swaps, a form of insurance against losses on loans and bonds.

A close examination by the Journal of that trading also reveals that the swaps played a critical role in magnifying bearish sentiment about Morgan Stanley, in turn prompting traders to bet against the firm's stock by selling it short. The interplay between swaps trading and short selling accelerated the firm's downward spiral.

This account was pieced together from the trading documents and more than six dozen interviews with Wall Street executives, traders, brokers, hedge-fund managers, regulators and investigators.

For years, sales of credit-default swaps were a profit gold mine for Wall Street. But ironically, during those tumultuous few days in mid-September, the swaps market turned on Morgan Stanley like a financial Frankenstein. The market became a highly visible barometer of the Panic of 2008, fueling the crisis that ultimately prompted the government to intervene.

Other firms also were trading Morgan Stanley swaps on Sept. 17: Royal Bank of Canada, Swiss Re, and hedge funds including King Street Capital Management LLC and Owl Creek Asset Management LP.

Pressure also mounted on another front. There was a surge in "short sales" -- bets against the price of Morgan Stanley's stock -- by large hedge funds including Third Point LLC. By day's end, Morgan Stanley's shares were down 24%, fanning fears among regulators that predatory investors were targeting investment banks.

That pattern of trading, which previously had battered securities firms Bear Stearns Cos. and Lehman, now is dogging Citigroup, whose stock fell 60% last week to a 16-year low.

Andrew Cuomo

Investigators are attempting to unravel what produced the market mayhem in mid-September, and whether Morgan Stanley swaps or shares were traded improperly. New York Attorney General Andrew Cuomo, the U.S. Attorney's office in Manhattan and the Securities and Exchange Commission are looking into whether traders manipulated markets by intentionally disseminating false rumors in order to profit on their bets. The investigations also are examining whether traders bought swaps at high prices to spark fear about Morgan Stanley's stability in order to profit on other trading positions, and whether trading involved bogus price quotes and sham trades, people familiar with the probes say.

No evidence has emerged publicly that any firm trading in Morgan Stanley stock or credit-default swaps did anything wrong. Most of the firms say they purchased the credit-default swaps simply to protect themselves against potential losses on various types of business they were doing with Morgan Stanley. Some say their swap wagers were small, relative to all such trading that was done that day.

Proving that prices of any security have been manipulated is extraordinarily difficult. The swaps market is opaque: Trading is done by phone and email between dealers, without public price quotes.

Erik Sirri

Erik Sirri, the SEC's director of trading and markets, contends that the swaps market is vulnerable to manipulation. "Very small trades in a relatively thin market can be used to … suggest that a credit is viewed by the market as weak," he said in congressional testimony last month. He said the SEC was concerned that swaps trading was triggering bearish bets against stocks.

Morgan Stanley had entered September in pretty good shape. It made money during its first two fiscal quarters, which ended May 31. It didn't have as much exposure to bad residential-mortgage assets as Lehman did, although it was exposed to commercial-real-estate and leveraged-loan markets. Mr. Mack knew that third-quarter earnings were going to be stronger than expected.

On Sept. 14, as Lehman was preparing to file for bankruptcy protection, Mr. Mack told employees in an internal memo that Morgan Stanley was "uniquely positioned to succeed in this challenging environment." The following day, the firm picked up some new hedge-fund clients who had fled Lehman.

But rumors were flying as traders worried which Wall Street firm could fall next. The chatter among hedge funds was that Morgan Stanley had $200 billion at risk as a trading partner with American International Group Inc., the big insurer on the brink of a bankruptcy filing, according to traders. That wasn't true. Morgan reported in an SEC filing that its exposure to AIG was "immaterial."

Some brokers at rival J.P. Morgan Chase & Co. were suggesting to Morgan Stanley clients it was risky to keep accounts at that firm, people familiar with the matter say. Mr. Mack complained to J.P. Morgan Chief Executive James Dimon, who put an end to the talk, these people say. Deutsche Bank, UBS and Credit Suisse also marketed to Morgan Stanley's hedge-fund clients, people familiar with the pitches say.

On Sept. 16, Morgan Stanley's stock fell sharply during the day, although it rebounded late. Some hedge funds yanked assets from the firm, worried that Morgan might follow Lehman into bankruptcy court, potentially tying up client assets. In an effort to quell concerns, Morgan Stanley released its earnings that afternoon at 4:10 p.m., one day early.

Colm Kelleher

"It's very important to get some sanity back into the market," said Colm Kelleher, Morgan's chief financial officer, in a conference call with investors. "Things are frankly getting out of hand, and ridiculous rumors are being repeated."

UBS analyst Glenn Schorr asked Mr. Kelleher about the soaring cost of buying insurance in the swaps market against a Morgan Stanley debt default. Protection for $10 million of Morgan Stanley debt had risen to $727,900 a year, from $221,000 on September 10, according to CMA DataVision, a pricing service.

"Certain people are focusing on CDS as an excuse to look at the equity," Mr. Kelleher responded, implying that traders betting on swaps were also shorting Morgan Stanley shares, betting that the stock price would fall.

It's impossible to know for sure what was motivating buyers of Morgan Stanley credit-default swaps. The swap buyers stood to receive payments if Morgan Stanley defaulted on bonds and loans. Some buyers, no doubt, owned the firm's debt and were simply trying to protect themselves against defaults.

But swaps were also a good way to speculate for traders who didn't own the debt. Swap values rise on the fear of default. So traders who believed that fears about Morgan Stanley were likely to intensify could use swaps to try to turn a fast profit.

Amid the uncertainty that Sept. 16, Millennium Partners LP, a hedge fund with $13.5 billion in assets, asked to pull out $800 million of the more than $1 billion of assets it kept at Morgan Stanley, according to people familiar with the withdrawals. Separately, Millennium had also shorted Morgan Stanley's stock, part of a series of bearish bets on financial firms, said one of these people. In addition, the hedge fund bought "puts," which gave it the right to sell Morgan shares at a set price in the future.

"Listen, we have to protect our assets," Israel Englander, Millennium's head, told a Morgan Stanley executive, according to one person familiar with the conversation. "This is not a personal thing."

Those bearish bets, small compared to Millennium's overall size, rose in value as Morgan Stanley shares fell.

That same day, Sept. 16, Third Point LLC, a $5 billion hedge-fund firm run by Daniel Loeb, began to move $500 million in assets out of Morgan Stanley. The following day, Sept. 17, Third Point, after seeing the surge in swaps prices, made a substantial bearish bet, selling short about 100,000 Morgan Stanley shares, trading records indicate. Third Point quickly closed out that position for a profit of less than $10 million, says one person familiar with the trading.

Around the same time, hedge fund Owl Creek began asking to withdraw its assets, and ultimately took out more than $1 billion.

On the morning of Sept. 17, David "Tiger" Williams, head of Williams Trading LLC, which offers trading services to hedge funds, heard from one of his traders that a fund had moved an $800 million trading account from Morgan Stanley to a rival. His trader, who was on the phone with the fund manager who moved the money, asked why. Morgan Stanley was going bankrupt, his client responded.

Pressed for details, the fund manager repeated the rumor about Deutsche Bank yanking a $25 billion credit line. Mr. Williams hit the phones. His market sources told him they thought the rumor false.

But damage already was being done. By 7:10 that morning, a Deutsche Bank trader was quoting a price of $750,000 to buy protection on $10 million of Morgan Stanley debt. At 10 a.m., Citigroup and other dealers were quoting prices of $890,000.

As the rumor about Deutsche spread, Morgan shares fell sharply, from about $26 at 10 a.m. to near $16 at 11:30 a.m.

Before noon, swaps dealers began quoting the cost of insurance on Morgan in "points upfront" -- Wall Street lingo for transactions where buyers must pay at least $1 million upfront, plus an annual premium, to insure $10 million of debt. In Morgan Stanley's case, some dealers were demanding more than $2 million upfront.

Bearish Signal

Firms making trades protecting against a Morgan Stanley default during Sept. 17 and 18, 2008

Firm	Net Purchase+ (in millions)	Comment
Merrill Lynch	$149.2	Doesn't comment on trades
King Street	110.0	Hedging
Royal Bank of Canada	69.0	Replacing Lehman swaps
Citigroup	55.7	Hedging, customers
Deutsche Bank*	50.6	Hedging, customers
Swiss Re*	40.0	No comment
Societe Generale**	37.5	No comment
Owl Creek*	35.5	Insuring collateral held at Morgan Stanley
UBS*	35.0	No comment
Liberty Harbor Master Fund**	30.0	Hedging
ACM Global Credit Fund	28.0	Hedging
Bank of America**	27.0	No comment
Castlerigg**	25.0	No comment
Barclays**	21.0	No comment
Cyrus Opportunity Fund**	20.0	No comment

+ Morgan Stanley debt covered by credit default swaps.

* Trading on Sept. 17

** Trading on Sept. 18

Source: Trading records, Wall Street Journal research

During the day, Merrill bought swaps covering $106.2 million in Morgan Stanley debt, according to the trading documents. King Street bought swaps covering $79.3 million; Deutsche Bank, $50.6 million; Swiss Re, $40 million; Owl Creek, $35.5 million; UBS and Citigroup, $35 million each; Royal Bank of Canada, $33 million; and ACM Global Credit, an investment fund operated by AllianceBernstein Holding, $28 million, according to the documents.

The following day, Sept. 18, some of those same names were back in the market. Merrill bought protection on another $43 million of Morgan Stanley debt; Royal Bank of Canada, $36 million; King Street, $30.7 million; and Citigroup, $20.7 million, the trading records indicate.

None of the firms will comment on how much they paid for the swaps, or whether they profited on the trades.

"The protection we bought was a simple hedge, not based on any negative view of Morgan Stanley," says John Meyers, a spokesman for AllianceBernstein. A Royal Bank of Canada spokesman says the bank bought the swaps to manage its Morgan Stanley "credit risk," and was not "betting against Morgan Stanley and conducted no bearish trades on its stock."

King Street, a $16.5 billion hedge fund, bought the swaps to hedge its exposure to Morgan Stanley, which included bond holdings, according to a person familiar with the fund. The fund didn't hold a short position in the stock, this person says.

Spokespeople for Deutsche Bank and Citigroup say their trading was relatively small and meant to protect against losses on other investments with Morgan, and to handle client orders. An Owl Creek spokesman says it bought the swaps "to insure collateral we had at Morgan Stanley at the time," and that it continues to do business with the firm.

Merrill, UBS and Swiss Re declined to comment on the trading.

As Morgan Stanley's stock tumbled, the number of shares sold short by bearish investors soared to 39 million on Sept. 17, nine times the daily average this year, adding to the 31 million shares shorted in the prior two days, according to trading records.

Mr. Mack sent a memo to employees on Sept. 17. "I know all of you are watching our stock price today, and so am I.… We're in the midst of a market controlled by fear and rumors, and short sellers are driving our stock down."

The stock and swaps trading were feeding on each other. That afternoon, Mr. Schorr, the UBS analyst, wrote: "Stop the insanity -- we need a time out." In an interview that day, he said "the negative feedback loop of stocks and CDS making each other crazy shouldn't be able to destroy the value of companies."

Scrambling to stop the crisis of confidence, Mr. Mack phoned Paul Calello, investment-banking chief at Credit Suisse, and asked whether he knew what was driving the cost of the swaps up so quickly, say people familiar with the call. Mr. Calello said he didn't.

Morgan Stanley's chief legal officer, Gary Lynch, once the SEC's enforcement chief, called New York Stock Exchange regulatory head Richard Ketchum. He said he was suspicious about manipulation of Morgan Stanley securities, and asked whether the NYSE would support a temporary ban on short selling, according to people familiar with the call.

Mr. Mack called SEC Chairman Christopher Cox, Treasury Secretary Henry Paulson and others. Trading in Morgan Stanley securities, he groused, was irrational and "outrageous," and "there's nothing to warrant this kind of reaction," says a person familiar with the calls. The steps already taken by the SEC to prevent certain types of abusive short selling, he argued, didn't go far enough.

In his memo to employees that day, Mr. Mack had made it clear that he intended to press regulators to rein in short sellers. When word about that got out, hedge-fund managers were up in arms. Some yanked business from Morgan Stanley, moving it to rivals including Credit Suisse, Deutsche Bank and J.P. Morgan. They said the trading represented legitimate protection and speculation.

James Chanos

Hedge-fund veteran Julian Robertson Jr. and James Chanos, a well-known short seller, both longtime Morgan Stanley clients, were both angry. Mr. Chanos says he "hit the roof" when he heard about Mr. Mack's memo.

After the stock market closed that day, Mr. Chanos decided that his hedge fund, Kynikos Associates, would pull more than $1 billion of its money from a Morgan Stanley account.

"It's one thing to complain, but another to put out a memo blaming your clients," says Mr. Chanos, who adds that the development all but ended a more-than-20-year relationship with Morgan Stanley. He says his fund hadn't bought any Morgan Stanley swaps or sold short its stock.

Other Wall Street executives, concerned about their stocks, were also calling regulators. At about 8:15 that night, the SEC said it would require more disclosure of short selling. Late the following day, Sept. 18, the SEC moved to temporarily ban short selling in financial stocks.

Mr. Mack contacted hedge-fund clients to tell them he hadn't single-handedly brought on the ban, and that he was primarily interested in giving the market a temporary "time out" from the volatile mix of rumors and trading.

But within days, more than three-quarters of Morgan Stanley's roughly 1,100 hedge-fund clients had put in requests to pull some or all of their assets from the firm, according to a person familiar with the operation. Even though most kept some money at the firm, Morgan Stanley couldn't process all the withdrawal requests at once, adding to market fear.

Morgan Stanley was in a precarious position. During the Sept. 17 trading frenzy, Mr. Mack had begun merger talks with Wachovia Corp. Four days later, Morgan Stanley shifted course, becoming a bank-holding company and gaining wider access to government funds. Last month, after raising $9 billion from a Japanese bank, it received a $10 billion capital injection from the federal government.

Morgan Stanley must now revise its business strategy to contend with a more risk-averse environment and the more stringent government oversight that comes with being a bank-holding company. Earlier this month, it announced it would fire about 2,300, or 5%, of its employees.

The cost of insuring its debt has come back down from its peak, but its stock remains in the doldrums. On Friday, it was trading at $10.05 a share in 4 p.m. composite trading on the New York Stock Exchange -- less than half of the $21.75 close on Sept. 17.

A month after the mayhem, Mr. Mack said in an interview that he had all but given up trying to get to the bottom of what was driving the trading in his firm's securities during those chaotic days in mid-September. "It's difficult to say what's rumor and what's fact," he said.

L'Italia (e il Regno Unito) fatica(no) a collocare le proprie obbligazioni

The UK and Italy struggled to sell bonds on Thursday in a fresh sign of the difficulties governments are facing because of the debt needed for economic stimulus packages and bank recapitalisations.

The two bond auctions saw both governments forced to pay higher yields to attract investors and Italy scaled back the amount on offer.

Analysts say it is an "ominous" warning that debt raising is likely to become even tougher in the coming months if problems are emerging so soon after government announcements to increase issuance. A record of more than €1,000bn ($1,290bn) of debt is expected to be issued in Europe next year.

Significantly, the bond auctions were for shorter-dated securities, usually the most sought after.

Roger Brown, global head of rates research at UBS, said: "The UK auction was dire. I do not remember one as bad for shorter-dated bonds. It is an ominous sign of trouble ahead.

"It is surprising to us that the UK Treasury should encounter such weak demand for a four-year gilt in only the second auction since Monday's pre-Budget report, when record levels of issuance were announced."

Giuseppe Maraffino, fixed income strategist at UniCredit, added: "The Italians ran into difficulties because of the lack of liquidity and investors. People are worried about the large amount of supply and the general environment."

Both the UK and Italian governments had to offer an extra 10 basis points compared with similar existing debt to entice investors to sell £3.75bn in four-year bonds and €1.4bn in three-year bonds respectively. The Italians also raised a lower amount than expected because of worries over weak demand.

Analysts emphasise that expectations of interest rate cuts in the UK, Europe and the US are supporting the bond markets and keeping yields historically low. For example, 10-year gilt yields this week dropped below 4 per cent for the first time since records began in 1961.

However, with economies contracting, lower tax receipts and rising benefit payments mean countries could face higher debt servicing costs as overall debt levels rise.

Among European countries, the UK and Italy may face the greatest difficulties because of their large debt programmes. The UK announced plans to raise an extra £37.4bn ($56.5bn) in gilts this year in the PBR.

This takes the overall total to £146.4bn – an all-time high and nearly three times the amount raised in 2007-08. The Debt Management Office forecasts bond issuance remaining high, at an average of £135bn a year, until 2013.

The Italians are forecast to issue up to €220bn in bonds next year, with €100bn in redemptions in the first half of the year – about €20bn higher than usual – putting the government under greater pressure to raise money.

UBS has warned that Italy's large debt burden of 103 per cent to gross domestic product – the highest in the eurozone – is unsustainable, forecasting it will rise to 107 per cent by the end of next year.

FT.com

Porsche: vendite in calo

Outlook: Porsche also affected by the general downward trend

Porsche Automobil Holding SE expects a significant drop in sales in the current business year 2008/09. The signs of a severe decrease in demand in the automotive industry are unmistakable the world over, and it is virtually impossible to calculate further developments particularly in the USA, Porsche's largest single market.

Porsche will hardly be able to escape this downward trend, so that currently we do not assume that we will be able to repead the high total sales of the previos business year. This is indeed borne out by revenue and sales figures in the current business year from 1 August to mid-November 2008, which indicate that turnover in the first four months of the business year 2008/09, that is up to 30 November 2008, will be slightly above two billion Euro following 2.36 billion Euro in the same period last year. Sales show a similar development, amounting to 25,200 units after 30,700 units year-on-year. The exact figures for the first four months will be published by Porsche in the Interim Report due in mid-December 2008.

Porsche.com

Nessun skateboarder nella stanza dei bottoni

«An Economist piece about incoming Treasury Secretary Tim Geithner explored Mr. Geither’s background in the Clinton Administration and his experience handling crises. But a number of blogs were more interested in a middle paragraph that that discusses Mr. Geithner’s youthful appearance and fondness for naughty words. It also notes that he snowboards and has tried skateboarding. The description prompted the Daily Showblog to correct an earlier post that described Mr. Geithner as “boring.”

A skateboarding Treasury secretary would indeed be something special. However, a Fed spokesman said yesterday that, in fact, Mr. Geithner doesn’t actively participate in skateboarding.

It was disappointing news, at least to this old skater — and probably a lot of others. You see, surfing and snowboarding have their government officials. Sen. John Kerry has been seen snowboarding and Hawaii State Sen.Fred Hemmings is a surfing legend. President-elect Barack Obama is known to bodysurf, which isn’t exactly surfing but surfers were still stoked .

We couldn’t find any skateboarders, at least active ones, in national office (we couldn’t find a survey). Best we could find was Tom Miller, who is indeed a ripper, as well as chief of staff for Portland, Oregon, Mayor-elect Sam Adams.

There are some theories as to why surfers and snowboarders have outdone skaters in seeking political office. Surfing and snowboarding tend to cost more, and this may act as a social filter.

Also, a lot of people start surfing and snowboarding in middle age. It’s certainly possible to pick-up skateboarding later in life, but few adults can stomach the time and pain commitment that learning skateboarding requires.

So it seems skaters will have to wait a bit longer for the first skateboarding Treasury secretary. Change can only happen so fast».

Real Time Economics

Pandit si giustifica (senza convincere)

Da Reuters.com

«Citigroup Inc Chief Executive Vikram Pandit on Tuesday blamed prior management for diving too deeply into real estate, causing losses that led to this week's massive government bailout of the second-largest U.S. bank by assets.

"What went wrong is we had tremendous concentration in the sense we put a lot of our money to work against U.S. real estate," Pandit said in an interview on PBS' Charlie Rose show. "We got here by lending money, and putting money to work in the U.S. real estate market, in a size that was probably larger than what we ought to have done on a diversification basis."

The government late Sunday rescued Citigroup by agreeing to shoulder most potential losses from a $306 billion portfolio of risky assets, and by injecting $20 billion of new capital, in its biggest effort to prevent a large U.S. bank from failing.

Citigroup has lost $20.3 billion in the last year, and many expect further losses from credit cards and other areas tied to the global economic crisis to pile up.

Since closing Friday at $3.77, Citigroup shares have risen 61 percent, and closed Tuesday up 13 cents at $6.08 on Monday. They have nevertheless tumbled 79 percent this year, after closing last year at $29.44.

Pandit said in the interview that short-sellers, as well as investors worried about Citigroup's asset quality, were among those who drove the bank's shares down in recent sessions, and that it was important "that we got control of the situation."

"I can completely understand how people on Main Street, people who are not close to this industry, would be furious at what's happened," he said.

Some wealthy investors have begun or pledged to begin buying Citigroup shares.

A Mexican brokerage controlled by Carlos Slim, one of the world's wealthiest people, spent about $150 million to buy nearly 29 million Citigroup shares between Nov 19 and Nov 25.

Meanwhile, Saudi Prince Alwaleed bin Talal last week said he plans to boost his stake in the bank to 5 percent from less than 4 percent».