John At The Center

…the large run up of the premium can be attributed to BEP returns overreacting to positive S&P 500 returns, adjusted for the deltas and gammas of the options that the fund was short. The paper then provides evidence consistent with the possibility that the large premium increase was driven by a near doubling of the VIX from very low and stable levels that had persisted for several months, which may have led unsophisticated market participants to bid up the price of BEP shares without regard to their underlying NAVs.

http://adamsoptions.blogspot.com/2008/11/bep-avenue-freezeout.html

Former Federal Reserve Governor Laurence Meyer and former Fed economist Brian Sack on Monday became the latest central bank watchers to forecast a zero federal funds rate early next year.

http://blogs.wsj.com/economics/2008/11/24/ex-fed-gov-meyer-sees-fed-cutting-rates-to-zero/

As I’ve stated before, this is highly unlikely in the near future.  It’ll effectively be zero but there’s no way they can go to zero with the implications on the money markets, etc.

The government is looking to buy substantial amount of assets from Citi like a good bank, bad bank structure.

http://www.marginalrevolution.com/marginalrevolution/2008/11/whoops-back-to.html

Jana plans a new share class for its funds starting in January that will lock up investors’ money for longer, but will charge lower fees. A spokesman for the firm declined to comment Monday.

http://www.marketwatch.com/news/story/story.aspx?guid={165C1B3D-85F7-407E-AF81-D9D09AE71BC6}&siteid=rss

FHA The New Subprime?

ABC News has learned that President-elect Obama had tapped University of California -Berkeley economics professor Christina Romer to be the chair of the Council of Economic Advisers, an office within the Executive Office of the President.

http://delong.typepad.com/sdj/2008/11/christie-romer.html

Yellen talked about this a few weeks ago at the Berkeley event.

Here’s are few articles from today on quantitative easing at the Fed.  I also found interesting the statistics framework used to show the Fed’s perspective on things (type 1, type 2 errors, one tailed, two tailed, etc.)

http://www.nakedcapitalism.com/2008/11/on-feds-shift-to-quantitative-easing.html

“It was a waste of money to put $25 billion into Citibank when within days the value of its underlying mortgages fell because TARP decided against buying distressed mortgages,” said Jonathon M. Trugman, founder of Pendulum Capital Management, a hedge fund. “The uncertainty that Treasury has introduced with TARP has cost investors far more in declining stock and bond prices than the $700 billion that the program received from Congress.”

http://www.nytimes.com/2008/11/23/business/23gret.html?_r=1&partner=rss

Nor does anyone who blames the GSEs for the crisis

Mr. Lewis said the crisis exposed inherent flaws in the structure of the giant government sponsored mortgage finance entities Fannie Mae and Freddie Mac, which he said were able to take on extra risk because of the implicit government backing they enjoyed as GSEs.

It’s true that Fannie had accounting issues and they suffered from mortgage losses but they were the sideshow and the thing that did them in was their funding sources went away pretty quickly.

Aside from that, their securities are still much higher in quality than some of the white label MBS crap that’s out there.  It’s a big difference when you to 80% LTV and the buyer has to put up 20% collateral.  All Fannie mortgages required that as a minimum, while the other securitizers allowed zero down and all that stuff.

http://dealbook.blogs.nytimes.com/2008/11/21/bofa-chief-blames-regulators-and-gse-flaws-for-crisis/

Felix Salmon:

The TED spread today is 213bp — more or less exactly where it’s been for the past few weeks. Which says to me that for all that financial stocks are being crushed, this is no reprise of the financial crisis we saw in the wake of Lehman’s collapse. Rather, it’s an old-fashioned economic crisis, which severely erodes the equity of leveraged banks, but where money still flows and even the occasional IPO can get away if it’s priced at a discount.

http://www.portfolio.com/views/blogs/market-movers/2008/11/21/this-is-not-financial-meltdown?tid=true