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 Australian Dollars, U.S. Dollars, you name it.
What a lot of people don’t realize that everyone [...]

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 VW, upped its stake in the company causing shares to rise. [...]

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 agree. Logic has it that the U.S., [...]

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 resort. This is very inflationary. Apparently, the Fed wants to [...]

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 matter of time before we started to see this occurrence.CNBC reported the following today:
Citadel [...]

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 Sachs and Morgan Stanley will have to either deleverage significantly or merge with an existing depositary institution with less leverage in [...]

UBS reported a loss of 358 million Swiss Francs ($332 million) after writing down a further $5.1 billion in debt.
In my post yesterday, I said the market expected as much. But, more importantly UBS has confirmed plans also mentioned in yesterday’s post of splitting the bank up into three autonomous units – effectively ending the [...]

I wish it were not so, but it is increasingly obvious that every part of the financial sector in the United States is infected by this menacing plague of credit losses and writedowns. Now it comes to light that the five biggest U.S. credit unions have lost so much on residential mortgage-backed securities that [...]

Let’s hope the UBS earnings report is not as bad as Merrill. If you recall, Citi, Merrills and UBS are the three worst offenders when it comes to writedowns. Given the recent asset sales by RBS and Merrill, one would expect to see some real ugliness at UBS tomorrow. Stay tuned.
The pressure [...]

I’m getting a lot of mail about the Rosenberg post and my mea culpa on inflation. To be blunt, a lot of you think I’m out to lunch and Rosenberg is too — after all inflation is over 5% and that’s just the bogus CPI measure our governments release.
But, alas, there is method to [...]