Faithful readers (and promiscuous ones too):
I’m in San Francisco through next Sunday, which means posts will be thinner than usual.
If you’d like to help, please send links or text of interesting news, academic papers, and reaserch.
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Re: Faithful readers (and promiscuous ones too):
4. random: occurring without any set or specific pattern or time ( literary )
a sail caught by a promiscuous wind??
from A Global House of Cards http://us1.institutionalriskanalytics.com/pub/IRAstory.asp?tag=269
Rosner: The housing market woes in the US will not be over before 2010, regardless of what legislative initiatives come out of Washington. The fundamental reason why we are having these problems in the US is that real wages and incomes have not kept pace with home prices since the 1960s and that’s what drove demand for these affordability products. Unless the Congress wakes up and let’s home prices correct so that we restore some balance between wages and affordability, this problem will remain for years to come.
The IRA: That implies a 40-50% cut in home prices from peak levels and an insolvent US banking system.
…and lots more…
There’s a nice commentary by Ken Rogoff on the potential for the euro to replace the dollar as the reserve currency. It’s at:
http://www.dailystar.com.lb/article.asp?edition_id=1&categ_id=5&article_id=90674
If someone wants to post up link tags for that, go for it; regrettably, I’ve never learned. (I’m a chronic late adaptor.) I have respect for Rogoff, and if I think exactly what he’s saying he is vastly better qualified to have a credible opinion on this.
He does make one statement which I find, ahh, behind the curve, to the effect that ‘if the EU could tempt the City of London to come onboard the euro, then the EU would have a major financial center to anchor them.’ Look . . . Britain is going to go _begging on its hands and knees to the ECB for a bailout_. The real estate bubble in the UK is at least as bad as in the US; their population is even more indebted, and the necrotizing fasciitis spreading Black Rot ‘mongst all the little and not so little hedgies there is spilling blood in the suites. The ECB has but out _hundreds of billions of euros_ in liquidity since August: just who do you think is swallowing up the main flow of that?
I strongly suspect that one consequence of the deflation of the Subcrime Bubble, and of the Americanization of the City of London will be the end of sterling arrogance and Britains’s bellycrawl to kiss the twin rods at the foot of the euro. . . . And about time, too. Either you’re in, or you’re out. Get smart, London: get into the Europe, then ride it up as the reserve currency. Why settle for silver sterling when you can mint gold?
Don’t know why my name didn’t come through on the preceding post; I don’t publish anonymously.
From FT: CDS report: Analyst say end to the tightening is nigh
“While key indices of credit default swaps continued to tighten on Monday, analysts warned that this did not necessarily reflect an improvement in risk appetite.
The cost of insuring the debt of the mostly junk-rated companies in Europe’s iTraxx Crossover index fell 13 basis points to 468bp. The index has fallen more than 100bp since April Fool’s Day.
A wave of short-covering has amplified the spread tightening, analysts said. Speculators started to cut their short positions when the Fed introduced unconventional measures to stabilise the financial system last month. Since then, the tightening has gained momentum as more and more bears got caught on the wrong side of trades.
However, according to Willem Sels, strategist at Dresdner Kleinwort, the market would soon turn as worries about economic problems returned to the fore.”
Market overvaluation??
The fourth quarter was one of those “if not for them” periods — Brown Brothers Harriman notes that S&P 500 earnings fell by 26.6% from the year-ago period, but without the financials, earnings were up 15%. The first quarter could be a repeat of that: they estimate a 9% decline in year-over-year earnings, thanks to an estimated 54% falloff in bank earnings.
Lower earnings equate to higher P/E, thus now is a great time to buy into overvaluation, and if you wait you will be priced out of a higher premium on lower value!
Welcome to San Francisco Bay Area…
Here I found a interested article.
SIVs Appear To Be DEAD! HEEEELLLOO!!!
http://market-ticker.denninger.net/2008/04/sivs-appear-to-be-dead-heeeellloo.html
It looks like FASB are going to change FAS140 to eliminate QSPEs by the end of this year.
For those banks who are hiding a lot of sh*t in off-balanced SIV, this new rule wouldn’t be fun.
I’m not sure if CLO/CDO are included in QSPEs. Does anybody know?
Doug Noland has a piece today in the Asia Times.
He disagrees with Bernanke’s understanding of the Great Depression and supports Mellon and the Austrians.
And therefore he questions the whole thrust of the Fed’s policy. Instead he sees the need for a major reworking of our economic system.
I would add that while I admire Bernanke’s handling of BSC, I am sorry he did not use the occasion to preach serious change. Instead he is allowing us to return to status quo.
Think of the Great Indonesian earthquake/tsunami a few years back, where the stress built up until there was a major rupture.
If we force our dysfunctional economic system to remain then as it is,and allow the pressure to build up even further we are setting the stage for an explosive rupture
Here’s an interesting link
http://www.bloomberg.com/apps/news?pid=20601087&sid=aYrLnryRU7iM&refer=home
Wall Street is pressing the Federal Reserve to take bonds backed by student loans as collateral in its new lending facility to stem a slump in demand for the debt that’s driving lenders to stop writing loans.
…
“There is a big concern among a lot of originators that there will not be enough capital available for all eligible students to receive government-subsidized loans,” Tom Deutsch, deputy executive director of the American Securitization Forum said in a telephone interview today from New York.
The Term Securities Lending Facility was created last month by the Fed to pump money into financial markets by extending credit to primary dealers of U.S. government debt.
Stopped Writing Loans
Among the collateral it accepts are AAA rated private label residential and commercial mortgage backed securities as well as collateralized mortgage obligations
…
About 6.7 million students and parents are expected to apply for a loan under the program in coming months, the letter said, noting that three-quarters of all student loan volume is originated between April and September.
This is about the only type of loan that I think will pay off for the taxpayers over the long haul and I would support its acceptance – so naturally the Fed won’t do it !