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With equity returns under strain, managers would do well to slow the pace of CLO issuance
Issuance has kept going by giving investors just what they want
John Healey resigned because the money was not there for defence. It may not be there for anything
Bifurcation is emerging in how investors treat the hyperscalers
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John Thain still has a firm hand on the tiller at Merrill Lynch, but the ship is so badly holed that he has had to resort to throwing the cargo overboard. By selling $30.6bn of CDOs to Lone Star, Mother Merrill has abandoned all dignity and allowed herself to be well and truly worked over by the Texans. This is no sale but a thinly disguised giveaway.
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This is not a glorious day for Merrill Lynch, but many in the UK and Europe will envy the way it can just swoop on the market and increase its capital by 35% in 24 hours. That is possible because US shareholders lack the pre-emption rights UK investors enjoy. Those rights are a holy shrine of the UK capitalist system — but many would now like them to be curtailed or even eliminated.
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Yesterday was a big day for the US covered bond market, with the release of a Best Practices Guide by the US Treasury, with a fanfare designed by Hank Paulson to show top banks were backing the product. But a lack of guidelines has not been the market’s main problem — it is that investors are not so far offering issuers pricing that is attractive enough to get the market started. When a new deal establishes that level, the celebrations will really be justified.
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US bank stocks charged higher when Wells Fargo and JP Morgan reported second quarter results last week. Investors saw signs that the worst of the writedowns and losses were over. But this rally was a mere pantomime — conditions are still getting tougher and many of the banks are not admitting how bad things really are.
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Standard & Poor’s has proposed that expected rating stability should be a factor when it assigns ratings. Well, duh! What does a high rating signal if not credit stability? This is an obvious measure which should have been done years ago, but S&P nevertheless deserves everyone’s praise for having the insight to cut through the twaddle and make ratings more meaningful.
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US bank stocks have charged higher since Wells Fargo and JP Morgan reported second quarter results last week with investors seeing signs that the worst of the writedowns and losses are over. But this rally could be mere comic relief —conditions are still getting tougher and many of the banks are not admitting how bad things really are.