Some odds and ends from the newswires that caught my attention:
- Did you know that nearly 50% of all commercial paper (CP) outstanding, the short term debt issued by corporations to fund day-to-day operations, are asset-backed? They are commonly issued by funding corporations to make loans, purchase mortgages, etc. Why does it matter? Because such money market instruments are heavily bought by money market funds (MMF's), those supposedly ultra-safe repositories of peoples' savings. Most Americans may not be aware of this, but several european "enhanced" MMF's (they go by names like "LIBOR Plus") have already experienced heavy losses due to asset-backed CP investments going sour. We're not talking 1-2% losses here, but double digit hits. One insurance company had to bail out its own fund.
- KKR said yesterday that its funding costs have increased significantly and that this may "adversely impact the returns of (their) LBO transactions". Citigroup estimates that $330 billion of bonds and loans for announced deals remain unsold. This is more than chicken feed and it certainly takes much more than a "snap of his fingers" to get $20 billion now, as a private equity honcho bragged just a few months ago.
- Goldman arranged an infusion of $3 billion into one of its quant hedge funds, after it was down 28% just this month alone. They hope that such a show of confidence will avert other investors from cashing out. My opinion? In for a penny, out of a pound. Oh, and on the use of "investor" as a term to describe those that partake of the hedge fund joys, I am reminded of what Alan Greenspan had to say of the dotcom "investors" back in 1999-2000: "Is that what we call them now?"