Monthly Archives: December 2015

Taxi lender’s stock dives after city botches medallion sale disclosure

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“The share price of Medallion Financial, which finances the purchase of taxi medallions, plunged 12.52% Monday after the city’s taxi regulator reported the sale price of a medallion without disclosing that only a 50% interest in the medallion changed hands.  Two years ago, individual medallions were selling for more than $800,000 and corporate medallions for more than $1 million.  Medallion Financial makes money from various other kinds of business loans, but its share price has suffered because of its association with the beleaguered taxi industry, and because of short-sellers trying to take advantage of that.”

http://www.crainsnewyork.com/article/20151208/BLOGS04/151209897/taxi-lenders-stock-dives-along-with-medallion-sale-price

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More Fidelity markdowns: Valuations slashed on Zenefits, Blue Bottle Coffee, others

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“Snapchat and Dropbox aren’t the only venture-backed private companies that Fidelity thinks were worth a lot less in September than they were in July.  The Boston mutual fund giant slashed its valuation estimates on Zenefits, Blue Bottle Coffee and others, too.  Fidelity has been one of the most active players in the surge of big late-stage fundings that have helped venture-backed companies build $1 billion-plus valuations without going public or being acquired. But there is growing concern that some of those valuations have gotten ahead of themselves.  A report by Morningstar said Fidelity cut the value of its investment in Snapchat by 25 percent and in Dropbox by 31 percent in the third quarter.”

http://www.bizjournals.com/sanjose/blog/techflash/2015/11/more-fidelity-markdowns-valuations-slashed-on.html

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Takeover Loans Have Few Takers on Wall Street

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“Wall Street banks are struggling to sell billions of dollars of loans they made to finance the corporate buyout boom, a sign that investor appetite for riskier debt remains muted despite a robust autumn rally in other financial markets.  The slowdown threatens to cool the surge in mergers-and-acquisitions that has sent takeover volume in 2015 to record levels, thanks in part to easy credit.  In past decades, banks sometimes held the loans until markets stabilized, but such warehousing became prohibitively expensive because of high capital charges required under the Dodd-Frank law that was passed in response to the 2008 financial crisis.”

http://www.wsj.com/articles/takeover-loans-have-few-takers-on-wall-street-1447028873

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Junk Bonds Are Tanking; Icahn Says Meltdown `Just Beginning’

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“A day after a prominent Wall Street firm shocked investors by freezing withdrawals from a credit mutual fund, things only got nastier in the junk-bond market. Prices on the high-risk securities sank to levels not seen in six years and, to add to the growing sense of alarm, billionaire investor Carl Icahn said the selloff is only starting.  ‘The meltdown in High Yield is just beginning,’ Icahn, who’s been betting against the high-yield market, wrote on his verified Twitter account Friday.  Junk-bond investors, already stung by the worst losses since 2008, are the most nervous they’ve been in three years after Third Avenue Management took the rare step of freezing withdrawals from a mutual fund.”

http://www.bloomberg.com/news/articles/2015-12-11/junk-bond-fear-gauge-nears-3-year-high-after-third-avenue-freeze

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Junk-Bond Funds Extend Losses as Lucidus Liquidates Holdings

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“Prices on U.S. high-yield bonds kept sinking Monday as London-based Lucidus Capital Partners became the latest fund to liquidate holdings as investors demanded their money back.  The risk premium on the Markit CDX North American High Yield Index, a credit-default swaps benchmark tied to the debt of 100 speculative-grade companies, rose as much as 17.1 basis points to 539.810 basis points at 8:31 a.m. in New York, the highest since November 2012.  Lucidus Capital Partners, a high-yield credit fund, said on Monday it would return the $900 million it has under management to investors next month.”

http://www.bloomberg.com/news/articles/2015-12-14/junk-bond-funds-extend-losses-as-lucidus-liquidates-holdings

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Stone Lion Capital Partners Suspends Redemptions in Credit Hedge Funds

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“Stone Lion, founded in 2008 by Bear Stearns & Co. Inc. veterans Gregory Hanley and Alan Mintz, is in a similar malaise, facing heavy losses on so-called distressed investments including junk bonds, post reorganization equities and other special situations, people familiar with the matter said.  Its oldest set of credit funds, which manage $400 million altogether, received ‘substantial redemption requests,’ precipitating the decision, the firm said in a statement. The firm didn’t give a time frame for when the money would be returned.  The firm continues to operate several other funds, including one that bets on Puerto Rico’s economic recovery.”

http://www.wsj.com/articles/stone-lion-capital-partners-suspends-redemptions-in-its-oldest-fund-1449870782

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UnitedHealth warns it may exit Obamacare plans

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“The nation’s largest health insurer warned Thursday that it may pull out of the Obamacare exchanges after 2016 – forcing more than a half million people to find other coverage – after low enrollment and high usage cost the company millions of dollars.  The possible move by UnitedHealth Group raises new questions about the viability of President Obama’s signature health law and follows the departure of more than half of the non-profit insurance cooperatives this year. If UnitedHealth drops out, consumers would lose one of the lowest-cost plans available in much of the country, and some wonder how smaller insurers could fill the void.”

http://www.usatoday.com/story/money/2015/11/19/unitedhealth-group-earnings-downgrade-obamacare-affordable-care-act/76040322/

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Dodd-Frank Creates a Liquidity Crunch for Bonds

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“While each individual institution is undoubtedly safer due to capital constraints imposed by Dodd-Frank, this makes for a more illiquid market overall. The lack of liquidity will be especially potent in the bond market, where all securities are not mark-to-market and many bonds lack a constant supply of buyers and sellers.  The bond market is much larger than the equity market, and a 30-year bond bull run has many investors and institutions heavily invested in the asset class. Furthermore, studies have shown bond investors to be more sensitive to poor performance since the asset class is usually perceived as having lower risk than equities.”

http://www.investopedia.com/articles/investing/072915/doddfrank-creates-liquidity-crunch-bonds.asp

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Ben Bernanke Was Incredibly, Uncannily Wrong [2009]

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“We now have the diametrical opposite of the famous ‘Peter Schiff Was Right‘ video (a compilation of 2006 and 2007 clips in which Schiff, a financial expert who subscribes to Austrian economics, predicted the deep recession that would follow the bursting of the housing bubble).  The new, opposite video is a compilation of the 2005–2007 prognostications of Federal Reserve Chairman Ben Bernanke. In it, Bernanke is shown to have been just as embarrassingly wrong as Schiff was uncannily right.  Could their differences in economic understanding have anything to do with this remarkable dichotomy?”

https://mises.org/library/ben-bernanke-was-incredibly-uncannily-wrong

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N.Y. Fed: Ample liquidity in U.S. corporate bond market

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“There is ample liquidity to buy and sell U.S. corporate bonds, a group of New York Federal Reserve economists found, dismissing worries that tougher regulations could threaten some investors’ ability to sell their holdings amid market turmoil.  Citing narrow bid-ask spreads and a low price impact from trades worth $100 million, the economists said their finding was ‘remarkable’ given the diminished role that Wall Street dealers have taken in making markets for corporate bonds. Dealers’ inventory of corporate bonds has plunged since the financial crisis to roughly a quarter from its peak of about $400 billion. Meanwhile, companies have been issuing U.S. corporate bonds at a record pace.”

http://www.reuters.com/article/us-usa-corporatebonds-fed-idUSKCN0RZ1RE20151005

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