Category Archives: Credit markets

Cognitive Dissonance in the Markets?

Even though the US Treasury market has taken a nasty downward move through an important level that many participants see as the beginning of a bear market in bonds (which will inevitably lead to a bear market in equities), actors in other sectors of the financial markets seem remarkably sanguine, at least so far. Is […]

Do Regulators Talk to Each Other? (Prime Broker Edition)

What the Fed and the Treasury would like take away, the SEC gives, and then some. The Fed is (finally) getting worried about systemic risk, and in this Financial Times story, the Treasury Department (which usually stays clear of this sort of thing, generally deferring to the Fed) says that it is concerned about hedge […]

On the Hedgies Complaining About Bear Stearns Modifying MBS

I must confess that I have stayed away from this controversy, in which various unnamed hedge funds are grousing about investment banks, Bear Stearns in particular, somehow mucking with the assets underlying certain mortgage-related instruments, modifying them so as to help stressed borrowers. The hedgies are upset because they allege that the investment banks are […]

WSJ: Housing Gloom Increases

We have been saying for some time that a housing recovery was quite a way off, and official opinion has finally caught up with our views (or more accurately, has decided to acknowledge obvious but unpleasant reality). The Weekend Wall Street Journal reports in a page one story, “Economists See Housing Slump Enduring Longer.” The […]

Further Signs That the Bear Market Has Begun

We observed that the sharp fall in the bond markets Thursday, which was triggered not by news, but by a collective recognition that credit was too cheap, seemed to many to be an inflection point, an end of a long cycle of falling interest rates. This development is important not just for fixed income investors, […]

Greenspan Opposed Greater Oversight of Subprime Lenders

I have been waiting for the reappraisal of Greenspan’s tenure to begin, and it might have started. Here you had a Fed chief who was more interested in understanding the stock market than money supply (see a Wall Street Journal May 9, 2000 first page story for confirmation) and who also appears not to have […]

Some LBOs Come a Cropper

The Wall Street Journal features a story, “Boom Aside, Not All LBOs Look So Hot,” which reports that some LBOs are in trouble a surprisingly short time after the deal closed. Now the Journal goes to some lengths to present these failures as deal specific by stressing that these cases are isolated, the economy is […]

The Beginning of the End?

For quite some time, we have written about indifference to risk, unjustifiable asset prices in many markets, and high levels of liquidity all as different aspects of what John Authers called “overvalued credit” meaning overly bullish (more accurately speculative) conditions in debt markets which fuelled overheated conditions in asset classes that could be financed (and […]

"Could the party be drawing to an end for bond investors?"

This story by Tim Bond in Thursday’s Financial Times, provides an excellent explanation of how a change in the universe of bond investors has produced new outcomes, like a difficult-to-explain negative yield curve. It also looks prescient in light of the plummet in long-dated Treasuries that day. Bond’s article says that “long term bonds are […]

Fitch Warns of Negative Impact of Hedge Funds on Credit Markets

Readers may notice today that we are a bit heavy on Financial Times stories. In part, that’s because the FT has a healthy respect for the fixed income markets. Political consultant and pretty scary guy James Carville once remarked, “I used to think if there was reincarnation, I wanted to come back as the President […]

Edward Charles Ponzi Jr. on Inflation and Asset Inflation

Edward Charles Ponzi Jr. occasionally comments at Angry Bear, and a recent submission became a post of its own. Ponzi makes several observations: what we have counted as growth (as in GDP growth) may be largely inflation (that statement is more accurate than you might think after you back out hedonic adjustments); that a lot […]

Rates Are Rising….

We are late to this excellent post by Barry Ritholtz (which also reminds us of the consistency of Business Week covers as a counterindicator; this example is from February 2007). And I’ve wanted to say something about rates creeping up, but I got beaten to the punch (although we have made the currency-realted observations, #5 […]

Fed Worried About 1998 Rerun

Michael Panzner pointed us to a Bloomberg column by John Berry, “Fed Officials Fret Another `Russia’ May Occur.” Frankly, we are delighted to read this. It is high time the Fed woke up and took stock of the excesses taking place in virtually every asset class. Not only do we have very high liquidity, asset […]

Wall Street Increasingly Reliant on Asset-Backed Securities

This Financial Times article, which describes the growing role that asset-backed securities play in investment bank profits, comes as no surprise. Not only are these products significant in terms of total revenues, but they are more profitable than the norm for these firms. But connect the dots: Wall Street is one of the biggest funding […]

Foreigners Buying the US: Should We Worry?

Mark Thoma quotes a Washington Post op-ed piece by Daniel Gross that gets worried about the current and prospective level of foreign ownership of US businesses: …In countries that are resource-rich or export powerhouses, governments and government-controlled entities have amassed huge pools of capital. A report issued last month by Morgan Stanley economist Stephen Jen […]