Randomly Noted

At first blush, the news at Legg Mason looked pretty encouraging – the company late Monday reported net income of $50.1 million and, as it noted in the second paragraph of its press release, assets under management rose 4% in the most recent quarter.

But a deeper look into the numbers shows that the asset under management gains were all driven by a 9% market appreciation in the quarter. So, if the markets were up 9%, how come its assets under management only rose 4%? Because it lost more client cash than it brought in.

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Another REIT Looking For Commercial Mortgage Opportunities

As we wrote earlier about the Invesco Mortgage Capital, the smart folks managing money see some good opportunities in beaten up corners of the markets – like residential and commercial mortgage backed securities. The challenge is getting investors to pony up some money and make those risky bets.

Another REIT filed threw its hat into the game today – CreXus Investment Corp. wants to raise $500 million to invest initial in commercial mortgage backed securities but ultimately it sees the portfolio becoming more heavily weighted toward commercial real estate loans. CreXus will be managed by a unit of Annaly Capital Management, which will own a little under 10% of the REIT after the IPO is completed. Annaly manges a portfolio of about $58 billion of agency and residential mortgage backed securities.

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In the run-up to the big announcement later this week about what the Obama administration really has in mind for financial regulatory reform, two big guns took to the op-ed pages to presage the plan.

U.S. Treasury Secretary Timothy Geithner and Director of the National Economic Council Lawrence Summers penned a Washington Post opinion piece published today that laid out the general rationale for reform.

What caught this reader’s eye was some of the specifics about the regulatory changes in store for asset-backed securities. Included in that is a statement about reducing the role of the credit-ratings agencies.

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Standard & Poor’s comments supportive of U.S. Treasurys’ AAA rating – reported exclusively by DJN – have just strengthened USD/JPY. They follow similar comments by Moody’s – Neal blogged about this Wednesday.  In our story, headlined “S&P Says US Rating Not Under Threat,” a senior S&P analyst named Kyran Curry addresses recent market speculation that the U.S. could lose its triple-A sovereign debt rating. Curry says: “We don’t believe so at the moment. No. We will have more to say about that in the next few days.” As DJN’s Simon Louisson writes, S&P’s decision last week to lower its outlook on the U.K.’s AAA rating spurred a USD selloff amid speculation about the U.S.’s standing. Curry, who is responsible for Australasia, tells DJN his comments reflect “a global view” within the agency and in fact he has been accompanying S&P’s global head of sovereign ratings on a tour of New Zealand. Check out Simon’s story for more on what Curry said about the U.S. economy and its medium- and longer-term credit quality. He also weighs in on the dollar’s global clout and the Obama administration’s fiscal planning. His comments came after S&P lifted a threatened downgrade on New Zealand’s sovereign debt rating after the government took steps to cut its budget, among other things.