Submitted by Edward Harrison of the site Credit Writedowns. As I write this, the U.S. dollar has fallen to new 8-month lows against the British Pound and oil. Sterling is up over 2 big figures to 1.6371 while oil (WTI crude front month contract) has marched up near $68 a barrel. Clearly the sell the […]
Read more...Submitted by Rolfe Winkler, publisher of OptionARMageddonBack in February, amidst the neo-Keynesian rage to spend our way out of recession, I argued that stimulus wouldn’t stimulate. Pointing to the graph of the 10-year Treasury vs. 30-year mortgage rates I said that the government wouldn’t be able to flood the market with Treasurys without driving up […]
Read more...The Fed has a mess on its hands. Yields on ten and thirty year Treasuries have shot up in the last few days as investors have become fixated on burgeoning Treasury supply in coming months and years. and, as belief in the “green shoots” story is rising, a shift to riskier assets. In addition, while […]
Read more...To be perfectly clear (as one discredited President was fond of saying), It would appear that the Treasury has a pretty considerable supply problem that is starting to hit now. Longer dated bonds slid in a serious way late last week and had another bad day today (although the 2 year action went well). And […]
Read more...An interesting piece in Bloomberg contends that the record low level of Libor, which would say that everything is hunky dory as far as banks lending to each other is concerned, is in fact giving a misleading picture. The spread among rates quoted is close to its highest level for the year, indicating some banks […]
Read more...Uncharacteristically for an economist, Wolfgang Munchau questions the conventional remedy for the debt millstone: use inflation to trash its value in real terms. Bondholders so often get shafted that it’s a predictable outcome. But is it wise? Munchau argues that regardless, the piper must be paid. If the powers that be succeed in creating meaningful […]
Read more...I always enjoy reading the Financial Times’ editor, Martin Wolf, but I sometime forget how refreshing and pointed he can be when he decides to let loose at a deserving target. Today’s lesson is the almost ludicrous efforts of the financial services industry to explain why the debacle that they just foisted on all of […]
Read more...The notorious Public Private Investment Partnership, aka “Son of MLEC,” was supposed to be up and running as of early May but its debut has instead been pushed off to July. The need to sort out some details is the official reason for the delay, but the Financial Times’ Gillian Tett says that the banks […]
Read more...Alan Greenspan tells us today that he sees signs of the housing market bottoming. The Financial Times tells us that delinquencies are increasing in prime mortgages, which are even harder to modify than subprime. I am beginning to get tired of the new mortgage lingo, or rather, the slippage of old mortgage lingo. In the […]
Read more...It only takes opposition by 10% of the bondholders to stymie an out-of-court restructuring of GM. The FT believes that there are enough bondholders who, via being net short GM bonds via credit default swaps, have good reason to block a negotiated outcome and force the automaker into bankruptcy. And that poses risk to the […]
Read more...Benjamin Friedman, in a review of George Akerlof and Robert Shiller’s Animal Spirits, makes an interesting observation: As in past financial declines, what is sorely missing in this discussion is attention to what function the financial system is supposed to perform in the economy and how well it has been doing it. Today attention is […]
Read more...As readers may know, secured lenders make loans against which specific assets are pledged. For consumers, mortgages and car loans are examples. If you default, the lender can seize the asset and sell it to try to recoup. In bankruptcy, secured lenders are normally the top of the food chain, but in the Chrysler bankruptcy, […]
Read more...One of the arguments apparently being made in Washington by those who oppose regulation of credit default swaps is that it would reduce liquidity and that of course would be a terrible thing. My impression is that no one has endeavored to put metrics on this assertion (as in how and where liquidity would be […]
Read more...The latest leak, arriving curiously after the markets closed, is that the Treasury wants Citigroup to raise $10 billion as a result of the famed stress tests, which the bank is fighting tooth and nail. Another rumors circulating in the media Is that Bank of America is being asked to convert $45 billion of preferred […]
Read more...Well, that isn’t exactly how the Financial Times’ Martin Wolf put it, but his comment today does carry a sobering message. Bank balance sheets need a tremendous amount of additional shoring up. Some not too pretty factoids: We appear to be less than halfway through writedowns, and the fundraising and recapitalizations to date are falling […]
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