Forbes and Bloomberg discuss Labor Department statistics that show that the hours worked by the self-employed fell at a 15.5% annualized rate in the third quarter of 207, the steepest drop in 15 years. The subprime crisis may be the big culprit, since construction workers and mortgage brokers are often in the ranks of the […]
Read more...Although it’s merely talk at this point, international regulators are considering how to reform rating agencies’ role in structured finance, which in hindsight contributed to many parties buying paper that was considerably riskier than they realized, One notion is to limit their their role in advising issuers on the design of structured finance products, which […]
Read more...Willem Buiter continues his quixotic campaign to extirpate lousy economic logic in the US. In a colorfully written post, he ridicules the refusal of any US economist (as far as he can tell) to consider that an American recession is necessary. He points to the obvious fact (commented on repeatedly in this blog) that the […]
Read more...Readers may note we have a fair number of posts from the Financial Times today. The pink paper is having a good day, and conversely, in the US, Super Tuesday has taken pride of place in the news. Martin Wolf in today’s Financial Times argues that more aggressive reform of the financial sector is needed, […]
Read more...A very good, accessible article, “CDS market may create added risks,” by Satayjit Das appears in today’s Financial Times. We’ve sometimes discussed the fact that credit default swaps, which effectively are insurance policies against defaults, suffer from considerable counterparty risk. A policy is only as good as the entity that wrote it, and many of […]
Read more...This story is so heinous that I couldn’t let it go by. Court filings indicate Wachovia not only permitted telemarketers to steal from individuals, but they were aware of the practice and turned a blind eye because it was profitable to them. And the targets of the fraud were typically elderly. The suit was filed […]
Read more...The Limits To Scenario Planning The Oil Drum. Much more interesting post than the anodyne title would lead you to believe. One of its threads in how people misread “The Limits to Growth.” Bankruptcy: No Obstacle to Private-Equity Profits Felix Salmon The Huge Hole in Unemployment Insurance Robert Reich Howard’s Economic Record John Quiggin. Not […]
Read more...As many reader likely know, the Markit CMBX indices are commercial real estate mortgage-backed securities default indexes, However, unlike the more familiar subprime indexes, the ABX, which is based on bond prices (so down is bad), the CMBX is based on spreads. When spreads go up, bond prices go down, so for the CMBX, up […]
Read more...In today’s post, “The Rising Risk of a Systemic Financial Meltdown: The Twelve Steps to Financial Disaster,” the bearish and prescient professor Nouriel Roubini sets forth how a systemic financial crisis could play out. The most troubling thing about this piece is that it is quite plausible. Of Roubini’s twelve steps, the first eight are […]
Read more...Stocks were down today, largely in reaction to the release of the so-called ISM non-manufacturing report, which monitors activity in the service sector (primarily assesses banks, retailers and construction companies). The results showed the sharpest contraction since 2001. Paul Krugman, who is not the bearish type, said the report indicates a recession is underway: The […]
Read more...Standard & Poor’s issued a research report today that stresses that bond insurer downgrades would hurt banks and in some cases could lead to reductions of their debt ratings. This report is in contrast to the comparatively cheery view of Morgan Stanley yesterday, that bond guarantor downgrades (presumably to AA; note further downgrades are possible) […]
Read more...Bloomberg reports that CDO trading has ground to a virtual halt, which isn’t surprising given the number of pending downgrades and the propensity for CDOs to be downgraded by multiple notchhes. From Bloomberg: Buying and selling of collateralized debt obligations based on mortgage bonds, high-yield loans or preferred shares has ground to a near-halt, traders […]
Read more...Th announcement by Fitch of tis intent to downgrade as much as $220 billion of CDOs is in keeping with an announcement by Standard & Poor’s of its plans to downgrade or put on review up to $534 billion of CDOs. Both are the result of new, more negative default assumptions in the underlying assets. […]
Read more...The bond insurer front was quiet, with the only major news item the release of a report by Morgan Stanley’s credit analyst that argues that bank losses from a bond insurer downgrade would be only $5 to $7 billion, and it therefore isn’t worth their while to stump up for a rescue. At this point, […]
Read more...A comment by Kenneth Rogoff in the Financial Times argues that rapidly growing emerging markets exhibit periods of crisis, and China has a long list of possible causes. Yet policymakers, focused on slowing US growth and financial institution stress in the US and Europe, have overlooked the problem that a sudden slowdown in China could […]
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