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Wall Street 'relieved' by Barclays' $2.7 billion subprime loss

It's not every season that Wall Street analysts greet losses or write-downs with smiles, but such is the case in the 'subprime watch' era.

Barclays (NYSE: BCS) Thursday said it wrote-down $2.7 billion of credit-related securities tied to the U.S. subprime mortgage market.

Investors once again appeared to be relieved that a major bank's subprime losses, while not small, weren't catastrophic. Barclays' shares fell just 44 cents to $43.44 in mid-morning trading Thursday. Further, Barclays' shares are up more than 10% for the week, an indication that investors may be regaining an appetite for the United Kingdom's third-largest bank.

Continue reading Wall Street 'relieved' by Barclays' $2.7 billion subprime loss

A silver lining: U.S. Q3 productivity jumps 4.9%

The dollar, it seems, can't stop falling; oil, on the other hand, can't stop rising (let alone decline a little); General Motors (NYSE: GM) is taking a $39 billion charge; there's talk that Morgan Stanley (NYSE: MS) may take an as-yet undetermined (oh no) charge related to subprime debt, and the housing market remains sluggish, nationally, to put it diplomatically.

Other than that, to cite a famous line by Groucho Marx, things are fine.

Still, you may be wondering, "Is there any good news out there, financially-speaking?"

Indeed there is: The U.S. Labor Department announced Wednesday that U.S. non-farm productivity surged to an annualized rate of 4.9% in the third quarter -- the largest increase in productivity in four years -- and well above Wall Street's consensus of about 3.5%-3.7% productivity growth.

Continue reading A silver lining: U.S. Q3 productivity jumps 4.9%

Hedge fund letter outlines how we got into this mess

As investors, we are blessed by the willingness of hedge fund operators to write letters to investors that describe the current financial situation. One such letter helps me understand how financial alchemy transformed subprime mortgages into AAA-rated paper eagerly consumed by European and Asian investors eager to recycle the cash generated by high oil prices and trade surpluses with the U.S.

Barron's [subscription required] excerpted this letter from "A (bearish) hedge-fund operator," in a letter to his investors, describes how a senior Wall Street marketing director recounted the genesis of the current situation:

"'Real money' (U.S. insurance companies, pension funds, etc.) accounts had stopped purchasing mezzanine tranches of U.S. subprime debt in late 2003 and [Wall Street] needed a mechanism that could enable them to 'mark up' these loans, package them opaquely, and EXPORT THE NEWLY PACKAGED RISK TO UNWITTING BUYERS IN ASIA AND CENTRAL EUROPE!!

Continue reading Hedge fund letter outlines how we got into this mess

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Last updated: November 11, 2009: 09:50 AM

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