just in in-tray,
A couple of things to note on my trip. More to come next week when I'm back in HK.
1 - Bear Stearns is in real trouble. Forget about their shitty
portfolio. They're losing clients in droves from what I heard. That is, Hedge Fund A has two prime brokers, say Goldman and Bear. They're all moving all their positions to Goldman only at the moment. Bear is losing out big time from what I hear.
2 - Lehman announced 5% job cuts. Almost every job cut was in NYC from what I was told, implying 15% cuts amoungst the staff in NYC.
There is another list put out for further job cuts, if needed. So LEH is preparing for worse if they need to pull the trigger.
3 - Perversely, Fed rate cuts at this point appear to be doing more damage than good. Why? Lower rates is not attracting new borrowing.
People are looking to deleverage rather than add leverage - period.
Second, all these bank loans that are "money good" are trading below 90 cents on the dollar and are now some LIBOR plus 400 b.p. in some cases. But that still gets you......less than 10% yields. So unless you're a bank, you're really not interested in buying debt at such spreads as the Fed continues to cut, your yield continues to drop, and nominal yields do not appear attractive. That means that the banks cannot get the paper off their books, which they are desperate to do,
have bloated balance sheets, and a buyers strike by those who could help the banks because absolute yields are still not attractive on an unleveraged basis. And no one wants to either leverage or can't get leverage if they wanted to... Not with banks having to borrow at L+200 nowadays. All lines that can be withdrawn from corporations are being withdrawn - even on the smallest infraction....
Question: What is the difference between a hedge fund and a bank?
Answer: Banks are more highly leveraged!!
In sum, a rate cut next week by the Fed actually hurts banks at this level rather than helps them.
That and "Bear is toast!"
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