A story by Andrew Ross Sorkin and Michael de la Merced, “Debt Linked to Huge Buyouts Is Tightening the Economic Vise,” covers the fact that private equity deals, which as a matter of course feature high leverage, are starting to hit the wall as the economy sours. This is hardly surprising; it’s happened in past […]
Read more...We have noted that Treasuries (and the dollar) are the remaining bubbles, although some doubts are starting to surface on the Treasury front. Paul Amery at Prudent Bear gives a good recap: The tectonic plates underlying the whole superstructure of debt have started to shift. On the surface nothing remarkable is happening – the 30 […]
Read more...In a move the stock market greeted with considerable cheer, JP Morgan announced that it was widening its program to modify mortgages. From the New York Times: JPMorgan Chase became the latest big bank to pledge to cut monthly payments, by lowering interest rates and temporarily reducing loan balances for as many as 400,000 homeowners. […]
Read more...One of the widely criticized features of Japan’s approach to its post-bubble crisis was that its regulators tried for some time to avoid the recognition of bank losses. In a deflationary environment, it was not clear how this would lead to a better ending, since with a flagging economy and no inflation to reduce the […]
Read more...Investment banks? What investment banks, says the alert reader. They are all gone, either bought by big banks, dead, or forced to become them so as to be able to pull funds from the Federal Reserve more readily. The Financial Times report that the changes to the bankruptcy law in 2005 may have played a […]
Read more...Let’s see, AIG had to ask to be included in the Fed’s new commercial paper program. AIG was reported to have said it needed a wee bit more money, but no more than $10 billion. No reasons were given in any news stories. Now we find out the intended use. From Reuters (hat tip reader […]
Read more...As the economy weakens, a predictable result is an increase in corporate defaults. In the early 1990s, the default rate on high-yield bonds peaked at 12+% (note some define the universe differently and come up with somewhat lower figures) The most recent Standard & Poor’s forecast, while noting a marked deterioration in the economy and […]
Read more...Before we debate the merits (more accurately, the lack thereof) of the latest trial balloon of a plan being floated to rescue overextended mortgage borrowers, we need to consider a few not sufficiently discussed facts: 1. The problem is that banks are not making loan modifications as they did in the past. That is turn […]
Read more...The agonies of Jefferson County, Alabama, which got itself into a too-clever-by-half funding arrangement that put the county on the verge of bankruptcy, have faded from the public eye. However, the type of transaction that caused so much woe, a swaption to supposedly lower financing costs, has been the subject of SEC and Justice Department […]
Read more...Bloomberg gives today’s sighting on money market conditions. Rates continue to improve but remain at elevated levels: Money-market rates in London dropped as cash injections by central banks and the prospect of deeper reductions in borrowing costs worldwide showed signs of revitalizing confidence in lending. The London interbank offered rate, or Libor, that banks charge […]
Read more...This informative discussion that sheds further light on the stresses created by credit default swap settlements comes in the current issue of the Institutional Risk Analytics weekly, “In the Fog of Volatility, the Notional Becomes Payable“: Another example of the ongoing discontinuity in the markets comes in the linkage between the unwind of credit default […]
Read more...This Bloomberg article treats as a news item the fact that the Treasury is focusing its equity infusion efforts on strong banks, leaving the rest to find their own exit strategy. But this approach is not surprise; in fact, it is exactly what Treasury said it would do in a conference call to analysts exactly […]
Read more...Consumers are in a newly austere mood, and those who have lived beyond or at the edge of their means may be forced to retrench whether they want to or not. The New York Times reports that credit card issuers are cutting back on their lines of credit and special offers. Since debt-fueled consumer spending […]
Read more...US equity markers were already having a very good day, even by the standards of recent high market volatility, where big snapbacks have become normal after sharps declines. But the very good day turned into a stunner after the announcement today of record commercial paper sales yesterday. The Dow rose 890 points, with a near […]
Read more...I’ve kept seeing mention of a possible 75 basis point cut by the Fed. As much as some traders seem to be lobbying for it, your humble blogger would regard Fed setting its policy rate at that level as entering the famed ZIRP (zero interest rate policy) land that has played a big part in […]
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