How many times has a really big thing started with a minor article in Bloomberg?
Hedge funds are concerned for the first time about risks related to prime brokers after Bear Stearns Cos.' forced merger with JPMorgan Chase & Co., said Hufschmid, 52, whose London-based company is administrator to funds managing about $104 billion.
Banks and brokerages have written down $495 billion and raised $356 billion in capital since the start of 2007 as the U.S. subprime mortgage market collapsed. Banks' increasing reluctance to lend has hurt hedge-fund operations, Hufschmid said in a telephone interview yesterday.
``Hedge funds live on credit and leverage and the ability to finance esoteric positions for a long time,'' said Hufschmid. ``To the extent liquidity is drying up as it is now, that becomes more difficult.''
Riddle me this. Where did they "get" $356b in new capital? Since when does a third of a trillion dollars lie around waiting for the right vehicle and that vehicle of choice is an over-leveraged hedge position?
38 comments:
With the inflation rates in this country, ⅓ trillion bucks will soon be just enough to buy breakfast at Denny's! :-p
FIRST!
Some of it is probably via the UK government printing money to support failed banks. It's got to go somewhere.
$356b is 1/6th of great Britain's GDP.
The US investment industry has lost $2 trillion but they have yet to acknowledge even a quarter of that. It also worries me that there have been so many so willing to pour good money into these black holes.
I'm trying to find a suitable link with the figures, but IIRC, the UK government is backing/covering the banking industry for up to £100bn plus chucking the odd £3bn into Northern Rock (failed bank, effectively nationalised at present).
Don't know where it's coming from now but I know it will come out of taxes in future.
Art,
I think there's a fundamental disconnect nearly everywhere. IMO there are no more taxes. We've reached the limits of taxation and there is no more and the appetite for debt on the markets is fast disappearing. We'll know in short order when California announces its first attempt at a budget probably around Tuesday or Wednesday.
Yes, the hedge fund explosion will be the fart that finally clears the room. But it is all just electrons in a computer somewhere. We won't be running out of those any time soon.
We've reached the limits of taxation
Wanna bet?
"But it is all just electrons in a computer somewhere. We won't be running out of those any time soon."
Electrons have to be produced and the fuel and equipment paid for. Just sayin.
I second Lou's statement. While California is certainly the overtaxed until broken canary a few other states still have a ways to go. So does the IRS.
Check out this "human interest" BS foreclosure story (I am so sick of this crap):
The final refinance at the end of 2006 left the family owing $454,000. The monthly payments of $3,362 exceeded the household income of $3,144.
What happened to the money from all the refinances?
Gardner can't quite say. Some went to paying off credit cards; some was eaten up in huge loan fees. What is clear is that the family has not made a mortgage payment since December 2006
By limits of taxation I don't mean they won't try. Sure they'll wring some more out of some of us but there's nothing Cali can do to get more revenue. Maybe a little more one time for 2009 but only at the expense of 2010 and beyond.
There's this silly Proposition on the ballot for the first $10b for high speed rail. 78% of those polled didn't even know about it. $650/registered voter. Insane in this economy.
Akubi,
Here is the link to the Gardner story from 12/31/07.
MORTGAGE MELTDOWN: The Gardner Family
.
OT - Has anyone noticed that the Russian military can't seem to hit it's intended targets?
@Tyrone,
So is the "niece" the neuro-chemically challenged one in this image?
Tax cars.
I want high speed rail!
With Ruby with big tits like Luba!
By limits of taxation I don't mean they won't try. Sure they'll wring some more out of some of us but there's nothing Cali can do to get more revenue. Maybe a little more one time for 2009 but only at the expense of 2010 and beyond.
Rob, with all due respect, Sacramento knows it has lots of wealthy people to tax and they know those wealthy people ain't going anywhere.
What's your pain threshold, Rob? Or the others from California in the upper brackets? I bet your pain threshold is pretty high. You live in a wonderful place with spectacular weather and beautiful views. I bet that taxes would have to go up a lot more before you decided to throw in the towel and move to, dunno, Kansas or Texas.
Oodles of new taxes are headed your way. Facts are facts. Sorry, dude.
Hey, Casey, why didn't you tell us about your new blog http://truecasey.com/?
Lou,Sacramento is sure gonna try to tax especially people like me. The problem is they've allowed an underground economy to florish. Push any harder and more will go underground than any additional revenue they might collect. Then there's the recession and high everything prices. Maybe the State thinks they've got the likes of me but there are millions who are on the edge in so many ways. Its also getting very crowded. That allows/causes some severe demographic substitution. If they hit the likes of me this year rest assured by next year I'll have made whatever changes necessary to deny them twice whatever they steal in 2009. There's absolutely no sense that Sacramento is in any way in touch or even aware or concerned about our interests. There won't be any stepping up or doing our share or all in this together this time.
Hey, Casey, why didn't you tell us about your new blog http://truecasey.com/?
I did, on Rob's previous blog post here, you dolt. ;-)
... and I'm not even the real Casey!!
My two cents:
California is a particularly tough state to manage because the electorate pretty much demands fiscal irresponsibility -- up to a point, and then governors get sacked for it. You can see this to a certain extent in any democracy, but it's far worse here.
Where else do you see people demanding that the state provide universal free health care in the midst of a crushing budget crisis?
Dawg seems to be in Akubi ignore mode, but I want my high speed rail like Japan - in other news KC is still clueless and went to church and found some vague God I don't understand.
In case you missed it, please note the Economics tag.
"At 10:57 PM, Rob Dawg said...
Lou,Sacramento is sure gonna try to tax especially people like me. The problem is they've allowed an underground economy to florish. Push any harder and more will go underground than any additional revenue they might collect. Then there's the recession and high everything prices. Maybe the State thinks they've got the likes of me but there are millions who are on the edge in so many ways. Its also getting very crowded. That allows/causes some severe demographic substitution. If they hit the likes of me this year rest assured by next year I'll have made whatever changes necessary to deny them twice whatever they steal in 2009."
Good luck with that.
I'm also one of the 'lucky' ones who got no stimulus check and realizes I will be tax assraped until I'm as poor as someone who PRODUCES NOTHING AT BEST AND SUCKS ON SOCIETY AT WORST.
But at least I'm not in denial.
Rob, I think you're right over the increasing taxes. It becomes a "diminishing returns" situation. The business that gets the bigger tax bill year after year starts more and more ways of avoidance or evasion and the tax "take" doesn't rise in proportion to the theoretical rise that should occur. Plus people and businesses re-locate if there's a better deal to be had elsewhere.
The extreme example is that proposition in Massachusetts about zero local tax (was it? I can't remember the details).
$356B is chump change, I have more than that in the seat cushions of my sofa. When they can conjure copious amounts with the press of a button it doesn't really take a miracle.
It's easier than ever to relocate from a high-tax state to a low-tax one, keeping the old home as your "vacation" property.
Our CPA built his firm over 3 decades, but waited until he had established Florida residency to sell it.
It's no mystery why so very few large companies are in California. Think Bank of America that quintisenstial California company.
the Scum is right, there's a draconian tax grab coming, I'm just saying it isn't going to work.
And no Akubi, I'd never ignore you.
I give the new Casey blog about three weeks. Boring stuff - he's putting out all the "trigger words", trying to rile up the haters and draw page views... but it's tired.
Not much to watch. Who cares if he's going to the gym every day. He's a loser, that hasn't changed. The fun was in watching what stupid thing he'd do next. Now, it's just a pathetic attempt to regain the "glory" days of IAFF. Not going to happen.
I'm betting in a couple weeks, he'll look at the page views and quietly slink back to his parent's couch.
Sad... I was hoping he'd come back and provide some entertainment, but there is no substance left.
Baiting the Haterz will not help Casey. To get his readership up, he needs to be baiting the FBI with a new crime.
New taxes are in the works. California is a middle tax state, so it by itself, could raise taxes. But taxes are going to go up, on the rich, at the federal level as well. And the double whammy will get folks screaming.
And as far as claiming another state as residence, while living in California, be careful. FTB is nasty and wants its money.
Yikes! Glod getting hammered. I should have realized that once Casey bought into GoldSpring, that was my cue to get out of the sector. Lesson learned; I'm thinking it will bounce (financial crisis over? hardly), but I think I will resist the urge to double down.
Other sectors starting to looking tempting, but I won't mention which as I don't want the Casey Contra-Indicator™ to move against me again.
I'm working on a radical new glod theory but i'm not ready to reveal it just yet. too weird and so I'm getting all the arguments lined up carefully.
Regards the glod crash. Yeah, the Casey Indicator™ is still a perfect contrary signal.
Personally I think anything over $650 glod is mostly a commodity bubble. You still need to conduit through a fiat currency to get anything else of value.
Doug Noland posited that the melt-up in stocks and the meltdown in commodities is massive speculative unwind rather than fundamental. He's convinced that after the speculative unwind ends, stocks will resume their downward dive; but it's not clear what the future for commodities will be.
You're right on glod, though, it's purely speculative, as it's never been a productive asset and needs to be translated into fiat to have any value. But that doesn't make looking for entry and exit points any easier.
Why does economics fall apart when you look at the taxes in California? I mean, there are more people here, so one would expect some economy of scale to make it cheaper to distribute services. It is true of all major cities -- there are very high taxes and fees in Chicago and New York too. I suspect perhaps the federal tax export migh have to be made up on the state level, just like the cities must pay for their republican suburbs. Anybody have a good reason?
Regards commodities. Remember that famous bet from the time of Club of Rome and Limits to Society?
Did you ever hear about the bet between Paul Ehrlich and Julian Simon? If
not, check it out:
http://en.wikipedia.org/wiki/Simon-Ehrlich_wager
The point of the bet was that all materials become less valuable with time. This is true because we learn about substitutes that lower the cost of, well, everything.
Is glod a material? At one time it was valued as its utility as a material. Then it became a store of wealth because it was compact and had value as a material. Then something weird happened and it became a form of currency medium. We can skip that part. Nowadays glod is a valuable material. 1/3rd is used for circuit boards and stuff. another portion is used to make pretty jewelry more valuable. Note it doesn't actually add much value as a working material but it gets people to pay more so there you are. If I could sell magic fairy dust for jewelers to sprinkle on their baubles I could command a high price as well. In fact DeBeers does exactly this.
"I'm glad it's done," Gardner said wearily. "I just want to sit down and have some Hennessy."
Robbo says: If I could sell magic fairy dust for jewelers I could command a high price as well.
Could you actually look into that? Myself and the other fairies are running a bit low. ;-)
lost cause said...
Why does economics fall apart when you look at the taxes in California? I mean, there are more people here, so one would expect some economy of scale to make it cheaper to distribute services. It is true of all major cities -- there are very high taxes and fees in Chicago and New York too. I suspect perhaps the federal tax export migh have to be made up on the state level, just like the cities must pay for their republican suburbs. Anybody have a good reason?
Wow. What a great question. I've held off on a new thread to discuss this.
"Real" economics does not fall apart anymore than does real physics. Part off the confusion is our current practices of false economics.
Then there's California which is in the midsts of an nearly unprecedented demographic shift from that of decanting the best of the Eastern Seaboard's people who were in turn the best of Old Europe's best people to a process of attracting the least productive with the least civic mindedness.
Then there's the limits of governance. I keep reminding people that California is plain old too large to operate as a legislative representative democracy. "LRD" just doesn't scale to 36 million. You might even notice that the more the Federalies begin to resemble a LRD the less functional they also get. California just got there first.
Don't confuse scalability and economy of scale with urbanization. Cities make it more expensive no matter what. Dependent variables? Independent? I don't know. All I know is that government services don't scale.
Then there's an assumption; "the cities must pay for their republican suburbs. Anybody have a good reason?" Rather than assert differently I ask an innocent question; Why are cities so desirous of annexation and the hinterlands so opposed?
OMFGBBQ -- I did it; I posted to numbnutz new blog....
When is this little wheatgrass stained POS gonna get tapped by law enforcement? He just thumbs his nose at it all... the cute has definitely worn off.
For some reason I had to be sumdood, not soem dood... oh well.
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