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Wednesday, September 19, 2007

If Only The Fat Lady Would Stop Caterwauling

Calculated Risk covers starts and permits.

Absolute Capital seems to be saying that you absolutely won't be able to get your capital back for a year:
Absolute Capital Management Holdings Ltd. halted withdrawals from eight hedge funds with $2.1 billion of assets after co-founder Florian Homm quit.

The firm will seek to extend a lock-up on redemptions for a year while it restructures the funds, Absolute Capital said in a statement today. Seven of the pools hold over-the-counter U.S. stocks that can't be sold at the prices the firm has on its books, affecting as much as $530 million of assets.

Absolute Capital clients tried to withdraw more than $100 million after Homm quit yesterday in a dispute over pay for the firm's fund managers. Homm, 47, managed three of the funds affected, and oversaw the others as co-chief investment officer. Shares of the company, which has its main offices in Majorca, Spain, slumped 84 percent in the past two days.
In today's environment, that 530 billion, which is about 1/4th of total capital, will be written down at least 20-30%.

I wouldn't go off on a euphoria binge due to yesterday's cuts. Every structural problem that existed yesterday still exists today. On the other hand, the future for genuinely good companies probably got a bit better. The investor beatings related to malinvestment will continue until morale improves. Morale will improve after all the rocks have been turned over and all the bad debt written down, so that is a long way in the future.

As expected, Fannie & Freddie are getting permission to increase their portfolio sizes. Fannie's stock shot up this morning.

"Thank you Sir,may I have another one" will be heard quite frequently over the next few weeks ,I believe.
Like the defense lawyer on FoxNews Monday night when asked to comment on the latest Cirque de OJ II development -- that audiotape of the stickup.

Without a word, he just held up a hand-lettered sign on-camera:

Both very apropos!

So far, so good. Stinky deals on Monday, if anything, seem to be provoking even more disgust. Rates on decent deals might be coming down a bit. The CPI/starts news is sobering up our euphoric equities traders a bit, all except gold bugs who believe with a passion that is inexplicable to all that are not of their faith.
Nothing pisses me off more than mark to market games. The fund can take 2% of the instruments and sell them. Just sell them. Bid, ask, rebid, close. THey then have with 2 sigme precision the exact mark to market value of the rest. It is outright thievery to claim they don't have a market price and that they cannot sell in this environment.

As to the rate cut. GMAFB. "Yesterday I was afraid to borrow 5.25% money to invest in worthless MBS paper. Today 4.75% money makes that worthless MBS paper look like a safe bet." All this did was loosen a little cash flow in the IBs and biggies until the effects more than pass through and they are stuck paying an even greater inflation premium.

In my own way I have a suggestion for the pithy phrase to describe the last few days: The lifeboat survivors are starting to drink seawater.
Rob - well, if it's a choice between seawater and urine....

You are right about the inflation; it's a tight margin the Fed must walk.
It is hard to beleive that people actually invested money with this company given that it was almost impossible to do due diligence on them and they were extremely reluctant to impart very basic information. Whoever said that the AIM market in London was the modern wild west get it right despite the indigant protests of the holier than thou Brits.
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