Ms. Maureen Bolton

GLG News by Ms. Maureen Bolton, Principal

GLG News is now G+ Insights

G+ is a community for professionals, academics and entrepreneurs to connect through online discussions and in-person meetings. You will continue to see G+ Insights (formerly GLG News) here as well as on the G+ website, where you can share and discuss the G+ Insights you read.

Will Government's Promotion of Covered Bonds as Mortgage Funding Mechanisms Bring Back Investors to US Mortgage Market?

July 30, 2008

Analysis of:Treasury and Banks Kick Start Home Financing Tool | www.reuters.com

This article is important because it announces and describes: a) the US Treasury's support of covered bonds, an on-balance sheet method of funding mortgage originations, as an alternative to off-balance sheet mortgage securitizations or mbs b) Four major US banks announcements of their intentions to bring covered bond issues to market in the near future and and their commitment to provide pricing information in order to facilitate the trading of covered bonds and c) the FDIC's support of a covered bond market and its policy statement describing how it would treat covered bond investors in the event that an issuing bank become insolvent. The government and market participant actions described in the article are remarkable because they appear to contemplate an on-going involvement of the US Treasury and FDIC in the funding of mortgages that is more hands-on than any such actions to date, creating a defacto US govt gtd covered bond market.

Like any proud shopper, Temasek is happy to have recognised a bargain in Merrill

January 7, 2008

Analysis of:Temasek Supports Merrill Despite Sub-Prime Losses | www.bankingtimes.co.uk

This article summarises Temasek's recent equity investment in Merrill, including the price paid and future intentions.  Temasek appears to be more than satisfied with its investment and is inclined toward similar investments (financial institutions undervalued due to over-estimates of subprime/CDO related losses) in the near future.

Liquidity Sponge Could Be Full After Last Week's Leveraged Loan Sales

October 15, 2007

Analysis of:Debt on Sale: Banks Grease | online.wsj.com

This article is important because it reveals the current efforts of banks to sell off leveraged loans and contrasts such efforts with past sales.  The fact that banks are offering price guarantees and discounts to buyers of loans related to buyouts of recession-proof companies is an indication that getting rid of the enormous, committed leveraged loan pipeline will be much more difficult than anticipated. In addition to detailing the type of terms the banks were offering sellers, the article also contains a terrific illustration of the  current road show environment  -still crowded- and attendees -KKR attended and bought loans related to its very own deal-resulting in the borrower merging with the lender. 

Once Again, UBS Gets Hurt By Following the Herd

October 4, 2007

Analysis of:UBS falls victim to credit squeeze | www.ft.com

This article is important not only because it announces a US$1.3 billion write-down of UBS' fixed income portfolio, but because it parallels the situation with that of Bear Stearns' (huge write-downs followed by the "departure" of a key executive) and questions whether there are more of such "disclosures" in the coming week as Merrill Lynch, Deutsche Bank and others announce their third quarter earnings.

Will China's rich enrich Morgan Stanley

September 25, 2007

Analysis of:Morgan Stanley to buy stake in China's Jutian Fund | www.reuters.com

This article announcing Morgan Stanley's plans to invest in Jutian Fund Management is important because it reveals another component of Morgan Stanley's investment strategy.   It also indicates that wealthy Chinese may be a more lucrative target for foreign investors, as opposed to the potential billion retail accounts.

Carribean for Customer Service;India for Intelligence

September 24, 2007

Analysis of:Forget India; Call Centers Boom in Caribbean | abcnews.go.com

This article is important because it describes the nearly five-fold rise in call center businesses in Carribean countries such as Jamaica and the Dominican Republic.  The article also details the positive economic impact that opening one call center can have on such small countries.  Finally, an optimistic prediction that such call centers can eventually evolve into more profitable work, such as creating web sites or assisting with IT problems is made along with the consequent mpact on the islands' employment levels and wages.

C-Bass breaks up Radian/MGIC marriage

September 10, 2007

Analysis of:MGIC, Radian End Merger Deal As Joint Venture Sustains Losses | online.wsj.com

This article is important because it announces the break up of what was to be one of the most synergistic mergers in mortgage-insurance history.  MGIC with its portfolio of traditional mortgage and bond insurance business  coupled with a bit of international exposure and Radian with its new product development skills and ability to rapidly respond to clients and assist them in assessing and pricing risk.  Unfortunately Radian lost MGIC's interest when their in-housen expertise at pricing and profiting from distressed mortgages -C-Bass lost  US$1 billion in market value due to investments in non-investment grade subprime mbs.

Schwartz May Be Smooth, But Spector Succeeded In Creating Bear Stearns' Primary Source of Growth

August 8, 2007

Analysis of:Bear Stearns Heir Apparent Tries to Restore Some Faith | www.nytimes.com

This article is important because it introduces the reader to Alan D. Schwartz, the new sole President of Bear Stearns, a dominant player in the mbs markets and raises the question of whether he can assure bankers regarding Bear's ability to retain the same access to the same money at the same rates.  The article also questions whether Bear Stearns can be successfully run by an investment banker and whether an outside investor may be solicited or decide to take advantage of Bear's lower stock price and take a sizeable position.  Current market conditions have caused the collapse of two hedge funds run by Bear and a crisis in confidence among its lenders. 

China's Media Mirage

July 26, 2007

Analysis of:Cracks in the Great Wall of China | www.theglobalguru.com

Recent discoveries regarding Chinese distribution of poisonous toothpaste, dog food and candy should cause us to reassess China's position as an Economic powerhouse. Sure, the Japanese and Koreans once made dodgy products, but their mistakes were due to their learning curve, as opposed to a deliberate deception in order to save money by swapping poisonous materials for more expensive ones. In this article, Nicholas Vardy cogently compares the mirage of China created by the media with the cold reality of its shaky economic state.

The Fed's estimates of subprime credit losses are irresponsible.

July 24, 2007

Analysis of:Subprime Losses Could Cost $100 Billion | newsmax.com

This article summarizes Fed Chief Ben Bernanke's recent testimony last week before the Senate Banking Committee and the House of Representatives. the Subprime Mortgage/housing market and the expansion of the Federal Regulators' role in monitoring mortgage lenders. Mr. Bernanke's remarks regarding both of these subjects are extremely significant, as hundreds of billions of subprime mbs and CDOs invested in such securities will be impacted by how the Fed views the damage caused by improper lending/underwriting and describes its impact on the overall potential for continued economic growth.  

Subprime Crisis? What Subprime Crisis?

June 4, 2007

Analysis of:Housing Boom 2.0 | money.cnn.com

Thanks to the recent increase in subprime mortgage delinquencies and defaults, the media has finally divulged three of the lesser known US mortgage industry practices. 1) Credit scores are not (or should not be) the sole factor in categorizing borrowers as “prime” or subprime”. 2)Brokers are compensated almost twice as much for bringing lenders subprime vs. subprime loans. This provides more than enough reason to put a borrower in the “subprime” camp, regardless of the qualification process. 3) Despite the deluge of information regarding mortgage products and interest rates that is made available to all of us via television, radio and newspaper ads-not to mention the internet, homebuyers most frequently rely solely on their realtor to assist them in obtaining a mortgage..

CDS Investors Claim Conflict if Subprime Borrowers Are Offered Modifications.

June 1, 2007

Analysis of:Gazprom refuses help with Shtokman | search.ft.com

This FT article brings up an issue that most of those interested in the subprime mortgage sector have been discussing –modifications for borrowers who are willing but not able to pay their mortgages. Most of the discussion has focused on legal and tax issues –Can you modify a loan within a REMIC? Will doing so destroy true-sale status? But this article describes a new issue: CDS investors, (i.e. those taking a short position in specific subprime mbs deals) claiming that loan modifications will minimize losses in subprime rmbs and therefore negatively impact the value of their CDS. To make matters worse, the broker that sold them the CDS is the same broker that structured and sold the subprime rmbs. Do we have a conflict here?

Derivatives for Dummies

April 25, 2007

Analysis of:At the Risky End of Finance | www.economist.com

This article, published last week's Economist, is the first article purporting to explain the global credit derivative market that I have read which isn't full of algebraic formulas.

It is a cogent and clear primer on derivatives and would be helpful to investors, clients and portfolio managers who are not yet familiar with derivatives. 

In addition to explaining how derivatives are structured, their purpose in the fixed income markets and their past and probable impact on risk management, the article offers significant food for thought on whether derivatives will do their job (i.e. mitigate the impact of credit defaults) when the bond market tanks.

Foreclosure is Far From the Only Option

March 28, 2007

Analysis of:Subprime Loan Servicers Step Up Loss Mitigation Efforts to Avoid Foreclosures | www2.standardandpoors.com

This Standard & Poor's report, released March 14, 2007 provides both crucial information and comfort to investors in subprime mbs or subprime mortgage originators. 

In light of the recent media blitz about increased defaults in subprime mortgages, S&P contacted each major Servicer and "Special Servicer"  to gauge their preparedness for the deluge of defaults subprime mortgages are expected to experience.

A cogent summary, it provides an introduction and succinct explanation of loss mitigation, how it is implemented by the Servicer/Special Servicer and gives one an idea of how a few of the largest players plan to approach this anticipated problem. 

It is no surprise that Foreclosure is not at the top of any of the servicers' plans.  In addition to defining "Loss Mitigation," the report describes the economic and operational aspects of the various alternatives to foreclosures.

Run For Cover

March 23, 2007

Analysis of:US Banks Move into Covered Bonds | www.efinancialnews.com

This article is important because it announces the willingness of US mortgage lenders, most of which are banks, to supplement their typical funding mechanism (i.e. mbs) to covered bonds. 

The article also provides a brief explanation of the covered bond structure and its authors indicate that several US banks are poised to follow WAMU and Bank of America and start their own covered bond programs.

Understanding the Covered Bond structure is crucial; If investors continue to avoid the US mortgage market;this funding mechanism will be adopted by more and more lenders.

Like it or Not, Subprime Loans Are Here To stay

March 13, 2007

Analysis of:New Century's Trials Are An Opportunity | www.forbes.com

This article is important because it contains a detailed and substantiated explanation of why the current problems with subprime lenders are an opportunity and why, despite the predicitions of just about every newspaper in the country, subprime loans are here to stay.

Can a lender and borrower have the same interests?

March 9, 2007

Analysis of:Debating Standards for Mortgage Lenders | www.wsj.com

This WSJ article is a cogent summary of recent efforts by State legislatures to protect borrowers against subprime lenders.

If implemented, any one of these proposed laws will immediately cut-off a vital source of funding for subprime borrowers.

In addition, the statutes would generate a significant amount of business for class action lawyers.

The Difference Between a Debt-Market Bomb and Credit Development

February 27, 2007

Analysis of:Debt-Market Bomb | articles.moneycentral.msn.com

Mr. Jubak's article is definitely worth reading, if only to hear his explanation of the current risks being taking by bond investors: insurance.  In his explanation, Mr. Jubak does a terrific job of dissecting credit default swaps and proceeds to inform us that the increase in their availability is causing bond buyers to disregard risks.

World's Top MBS Manager Denounces Predictions of Systemic Credit Risk

February 16, 2007

Analysis of:Structured Finance "can weather bad debt conditions" | www.financialnews-us.com

This article represents the sole rational and credible (by virtue of the speaker's managing the world's largest bond funds) description of the current mbs market conditions and the impact on mbs investors.

The Story Behind The Story

February 16, 2007

Analysis of:Mortgage Hot Potatoes | online.wsj.com

The article describes Wall Street's increased intent to "put-back" subprime loans to the lenders who sold them and the consequent impact such requests have on subprime lenders without access to funds.

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