Tiger Woods has been in the news in these last few weeks, though not in the way he has been in the past. As his personal travails have mounted, his endorsements have dropped off. Now comes a study by two professors at UC Davis, looking at the companies that sponsor Tiger.http://www.news.ucdavis.edu/search/printable_news.lasso?id=9352&table=newsThey find that the collective market value of these firms dropped $10-$12 billion between November 27, the fateful day when Tiger drove into a fire hydrant outside his house, to December 17 (thirteen trading days later).Note that Tiger is not the first...
Greece, EU and more on Implicit Backing for Debt
Building on the theme of my last post, i.e., that implicit guarantees for debt are common and potentially dangerous, Greece offers an illustration of both the upside and downside of implicit guarantees.Greece has been in the news as both S&P and Moody's have lowered its sovereign rating, from A- to BBB+ (for S&P) and from A2 to A1 (for Moody's). The harsher downgrade from S&P drew Greece's ire:http://www.ft.com/cms/s/0/d4bdc8f2-eb13-11de-a0e1-00144feab49a,dwp_uuid=2b8f1fea-e570-11de-81b4-00144feab49a.htmlQuestions have been swirling about Greece defaulting and how the rest of the EU...
Dubai and the "implicit" guarantee
In the last two weeks, we have seen the damage wrought by the potential default of Dubai World, a Dubai-government controlled company that funded some of the most extravagant projects on the face of the earth over the last decade.http://www.bloomberg.com/apps/news?pid=20601087&sid=aoFe12bwzZ2MWhile the magnitude of the default was large, it is interesting that it has shaken markets as much as it has. After all, there have been other large loan defaults in markets over the decades. So, why the panic? I think the reason lies in the unraveling of what I would call the "implicit guarantee".What...
