New York | When we first heard news reports about a new investor in Deutsche Bank (DB), we of course assumed that this meant the purchase of new shares and thus an increase in capital. But no, it was merely an “activist investor” taking a stake in existing shares. Is this really news or merely a sign of a top in large bank stocks? The DB common is trading a hair over $10 or just 0.3x book value and has a beta of 1.5. Douglas Braunstein, founder and managing partner of Hudson Executive Capital
New York | In his new book, “Keeping At It: The Quest for Sound Money and Good Government,” by Paul Volcker (1979-1987) with Christine Harper, the former Fed Chairman delivers a sound rebuke to Chairmen Ben Bernanke (2006-2014) and Janet Yellen (2014-2018), and other Fed governors and economists, for fretting overmuch about deflation. He argues that the true danger is that loose monetary policy leads to inflation and market contagion caused by the manipulation of risk preferences. Volcker
New York | Last week we almost welcomed the news that the Securities and Exchange Commission had accused Tesla Motors (TSLA) founder Elon Musk of securities fraud. This is not because we hold any ill will towards Mr. Musk, but rather because news of the SEC action provided some relief from the political spectacle that dominated the past week. Speaking of real news, we were on CNBC Monday to talk financials with Brian Sullivan (below).Fortunately Mr. Musk was smart enough to cut a deal to settle
Grand Lake Stream | The discussions this weekend at Leen’s Lodge in Maine were wide ranging and, as always, of great interest. Will Argentina’s economy implode? (A: Sadly yes). Argentina is trading at a discount to Uruguay. Will the commercial real estate market in the UK likewise collapse as the train wreck called Brexit unfolds? (A: In progress). When will the yield curve invert? (A: Soon).Indian Township, MaineOne of the most interesting points of debate was the impact of the 2001 decision by
New York | Last week Federal Reserve Board Chairman Jerome Powell confirmed that the Federal Open Market Committee intends to keep raising short-term interest rates based upon the strength of the US economy. Powell gave no indication that he is concerned about the rapidly approaching inversion of the Treasury yield curve or what this portends for banks and leveraged investors of all stripes, including the housing finance sector. Also last week, the Federal Deposit Insurance Corporation released
New York | Watching the meltdown of Tesla Motors (TSLA) founder and CEO Elon Musk last week unfold in the pages of The New York Times, we are reminded that enterprises need both vision and operating smarts to be successful. It was obvious years ago that Elon Musk needed help to build a new car company. Yet somehow the members of the board of directors of TSLA did nothing as Elon Musk led this extraordinary endeavor.We noted in Ford Men: From Inspiration to Enterprise that Henry Ford had the
By any standard, credit spreads in the US bond and loan markets remain very tight. Now several years into a Fed interest rate tightening cycle, short-term interest rates are rising but spreads do not expand.
Dana Point | Since the lows of late-June, financials have rebounded more than 10% even as issues such as trade and the flattening Treasury yield curve have dominated the Wall Street narrative. Meanwhile, the bloom is clearly off of the rose in the world of real estate as prices for high-end residential and commercial assets have started to swoon. Lower prices mean higher loan-to-value (LTV) ratios, rising loss given default (LGD) and eventually increased loan default rates.While backward looking
Grand Lake Stream | During our fishing trip to Leen’s Lodge last week, there was a lot of discussion about the markets and whether the Fed is going to successfully manage the return to normalcy. Our bet on that question is “no” as we noted in a missive yesterday by Jeff Cox of CNBC: “The Fed’s effort to control the rise of its key interest rate is running into some problems.” Dr. George Selgin of Cato Institute has a timely new paper appropriately entitled “Floored” that discusses this issue of
Are landlords actually getting squeezed at the moment and contrary to the popular press?