Kapstream Capital

A Giant victory 

January 2012

In what is likely to be the most-watched television show in US history, the New York Giants defeated the New England Patriots in Super Bowl XLVI by a score of 21-17. At the start of the season, the Giants' odds of winning the Super Bowl were 25-1, similar to our expected probability of European policymakers getting ahead of their growing economic problems. Like the New York Giants, European policymakers beat long odds in (at least for the moment) getting ahead of their problems, mainly due to the actions of the European Central Bank (ECB), who finally decided to join the global liquidity party.

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Don't bank on it

May 2011

It hasn't been a particularly good month for bank ratings and bank investors around the world. There have been numerous ratings downgrades, significant haircuts being forced on Irish bank bondholders, spreads have been widening and there are talks of more downgrades to come. The world continues to take a hard look at banks following the global financial crisis. Significant regulatory changes are in the pipeline and agencies continue to tweak their rating approaches. The banks themselves were one of the major causes of the crisis (along with rating agencies) and warrant restructuring, tighter regulation, more transparency and higher liquidity and capital standards. This process of change is underway but it will take a few years. This month has been a reminder that things will be changing.

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