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>From: LePatron@xxxxxxxxxxxxxxxxxxx
>To: trdoptions@xxxxxxxxxxx
>Subject: Charles Peabody - A Primer on Credit Derivatives + Bank of America
>Corp. "Questioning BAC's Capital Management"
>Date: Thu, 2 Sep 1999 16:17:59 -0400
>
>Le Metopole members,
>
>Charles Peabody has served two commentaries at
>the Hemingway Table for you. The first is entitled,
>" A Primer on Credit Derivatives."
>
>"With the news that Ecuador may default on its Brady
>bonds, derivatives as an asset class may return to the
>spotlight. More specifically, with the news that a
>"credit derivative" linked to Ecuadorian government
>bonds and underwritten by Merrill Lynch has lost almost
>all its value, I thought it might be useful to provide
>investors with a primer on "credit derivatives." A
>sort of derivatives 101, if you will.
>
>What is a credit derivative? ………………"
>
>
>The second serving is entitled, "Bank of America Corp. -
>"Questioning BAC's Capital Management."
>
>"I would argue that Bank of America is in worse shape
>than most banks in terms of their capital adequacy.
>First of all, Bank of America’s unrealized losses are
>larger than those at most any bank in the Mitchell
>Securities bank universe. Secondly, its accounting
>practices tend to be a little more aggressive than most,
>leaving little room for error in its valuation of
>assets. And finally, before making any such adjustments,
>Bank of America’s stated Tier I (7.38%) and leverage
>capital (6.34%) ratios are already some of the weakest
>in the Mitchell Securities bank universe (see Table 2).
>At June 30, 1999, the average Tier I and leverage
>capital ratios for the Mitchell Securities bank
>universe were 7.6% and 7.1%, respectively."
>
>The banking index is now down on the year. In
>addition, there is one banking scandal after another
>cropping up. Some are making headlines. Some do not.
>
>I will go into this in the next Midas, but Charles
>Peabody informed me today that First National Bank
>of Keystone was just shut down by the Office of the
>Comptroller of the Currency for fraud. It was the
>biggest U.S. bank failure in 7 years. Were you aware
>of that? They were reporting $1.1 billion assets.
>Minor detail - $515 million of them were phony.
>
>This scandal follows Credit Suisse's one way trip
>out of Japan for fraud, The Bank of New York Russian
>money skimming scandal, today's Republic Bank scandal, etc.
>
>This may be just the "tip of the iceberg." The banks
>are rife with fraud and shady business practices.
>
>I will also be covering what all this means to the gold
>market in the next Midas. Guess what that might be?
>In the meantime, stay on top of what Charles Peabody
>has to say. His predictions for 1999 and what
>was going to happen (and why) in the
>bond and banking world, are all coming to pass.
>Remember, he has predicted a banking stock crash.
>Today the bank index was down over 16 more
>points and shows no bounce to the ounce.
>
>If the bank stocks crash, can the la la internet
>stocks and other overvalued stocks be far behind?
>
><A HREF="http://www.lemetropolecafe.com/scripts/products.cfm";>Le Metropole
>Café</A>
>
>All the best,
>
>Bill Murphy
>Le Patron
>
>
>
>
>
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