Wednesday, August 13, 2008
Losses recognised to date - and where to look for more
A lot of them wound up in the European banking system - witness Natixis and UBS.
I did however underestimate the losses that would wind up in the US banking system - and Tanta is now saying that it was a little more complicated than my 2006 view. (See this Tanta post I mildly disagree with.)
But data is what I tend to crave. Bloomberg publishes a list of total losses recognised in this crisis so far. The number just passed 500 billion - which means I think it is about half-way there...
Here is the list - but I have done something else - I have divided it into US Investment Banks (Lehman, Bear etc), US Banks dominated by investment banks (Citicorp, JPM), and conventional US banks (Fifth Third, Keycorp).
The conclusion - conventional US banks are only about a sixth of the losses. The Europeans have hurt MUCH more. What Tanta derides as conventional wisdom of 2006 was mostly correct.
What is interesting about this list is the absence of one core type of financial which is loaded with long term assets, CDOs, mortgages and other potentially toxic stuff. Where are all the life insurance companies?
I have a few shorts in that pile. There are probably plenty more - but I don't see anyone publicly berating those incomprehensible piles of mediocrity.
If you are looking at conventional banks you might find some credit losses. Indeed I am short a few conventional banks in anticipation. But they are not where I think the really good ideas are.
Post script: my classification of institutions seems fair enough in most cases - though JPM has made a fair few of its losses outside the investment bank. I also classified Barclays as a US investment bank. That seems fair enough to me...
The Bloomberg list does not include other culprits such as the GSEs, mortgage insurers and bond insurers. If anyone has a more complete list please forward it to me...
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