http://desicritics.org/ Superior South Asian bloggers on Culture, Media, Politics, Sport, Business, and Technology. en Copyright 2006 by the authors Thu, 20 Mar 2008 02:26:48 EDT http://backend.userland.com/rss BC custom software http://desicritics.org/2008/03/17/113609.php#comment-325912 cs, lol, yes, well, most of the bigger broker dealers have a nice little prop operation going, specially the ones operating on a riskless or principal trading, so yep, they all have trading books, at least the ones which I have seen. Also, on the smaller ones, if they are simply agency trading, then no, they wouldnt have it, but the big banks and broker dealers all have them. and yes, all my students and mentees are panicking a bit, but that's the downside of studying in business, if you dont plan your exit according to the business cycle, one will get stiffed. I did, and then went in a different direction, lol 325912@desicritics.org Thu, 20 Mar 2008 02:26:48 EDT http://desicritics.org/2008/03/17/113609.php#comment-325815 bd, The crucial adjective: "trading book". Regular banks can have "banking books"; broker dealers, to a large extent, cannot. Interesting times indeed. Could you have imagined repo freezing up for the fifth largest broker dealer even a week ago? People who have the option shd stay in school for a few more months until the situation stabilizes somewhat. 325815@desicritics.org Wed, 19 Mar 2008 11:42:58 EDT http://desicritics.org/2008/03/17/113609.php#comment-325814 bd, The crucial adjective: "trading book". Regular banks can have "banking books"; broker dealers, to a large extent, cannot. 325814@desicritics.org Wed, 19 Mar 2008 11:40:36 EDT http://desicritics.org/2008/03/17/113609.php#comment-325662 CS, gosh, you raised so many points, I dont know where to start, lol. 1. JPM, Citi all have to mark to market their trading books and that's what's hitting the entire market. Whether you are an investment bank or corporate bank or a universal bank, your books and assets have to be marked to market until and unless you have parked your assets in an SIV or OBSV. Depending upon where you are based, check out the IASB or FASB regulations. 2. If you are looking at credit products, the toxic elements of your credit tranches has really gone hyperradioactive. When the bottom layer of your security comprises of the bits which relate to the one million unsold homes, then the pricing is going to suck. 3. when there is no repayment on those mortgages or the builders have sunk losses on those vast array of houses, somebody has to take the hit. And initially, that's what's driving the down turn in the market. Now other factors are coming into the picture 4. Basel II is hitting the banks, but not that much, dont forget, only 20 banks in the USA have to fulfil Basel II and that too on a slightly different angle to rest of the banks. 5. I do take your point that some element of self fulfilling prophecy with respect to mark to market of counterparty positions, the default rate, probability of default, the risk weighted assets... all those are getting hit, but still, B2 is better than B1. 6. But keep a beady eye out on the Tier 1 capital of the financial institutions. Bear Stearns, even with 30 billion in cash, could not stay afloat. Lehmans has 200 billion in cash and people are looking at them suspiciously. .... fun times... 325662@desicritics.org Tue, 18 Mar 2008 17:01:15 EDT http://desicritics.org/2008/03/17/113609.php#comment-325637 bd, I think in the investment banks, some of the resentment is that groups like Chase and Citi, and BoA does not have to mark to market because these are banks and can elect a different accounting treatment, whereas no division within an IBank can do it, even on loans to be held to maturity. The cashflow profile of many (even prime) loans haven't changed, whereas the discount factors have worsened. The real issue is mark to market coupled with Basel. 325637@desicritics.org Tue, 18 Mar 2008 11:09:50 EDT