Although it’s the Dow’s new highs that get the headlines, the really speculative action is taking place in the debt markets. As we have discussed in past posts, lenders and bondholders have abandoned their customary caution and are accepting yields that many feel are inadequate for the risks involved, and are also waiving customary covenants, […]
Read more...While most US readers believe that the Journal’s ideological bias is limited to its editorial pages, we have repeatedly seen (and commented on) skewed reporting as well. Specifically, the Journal tends to put a positive spin on economic (as opposed to company-specific) reporting. Today’s object lesson is the Bank of England’s latest edition of its […]
Read more...Felix Salmon thinks so: Sitting on the property panel with Bob Toll was Steven Green, of Greenstreet Partners. He had a very good explanation for the run-up in US property values in recent years: financial derivatives. “People always told you that there was no liquidity in real estate,” said Green. “And now the financial derivatives […]
Read more...It’s one thing when people who have little to no experience in the financial markets worry about the risks posed by derivatives and other innovative financial products. It’s quite another when a concerned individual also happens to have been deeply involved in risk management at major Wall Street firms. The financial markets insider is Richard […]
Read more...We’ve argued several times that the Fed isn’t what it used to be (see here and here and here), so we are gratified to see other commentators take up the theme. The headline the title of a post by Russell Wood at Seeking Alpha. It makes some important observations: the Fed regulates banks only, and […]
Read more...There are two reasons this item, picked up in Felix Salmon’s blog, is noteworthy. The first is that investment banks happily extending their balance sheets to help get M&A transactions done is a classic sign of the end of a cycle. The second is that Salmon, who is vastly more sanguine about the state of […]
Read more...An excellent article Thursday in the Financial Times, “In the new liquidity factories, buyers must still beware,” by Mohamed El-Erian, the CEO of Harvard Management Company. He explains that a great deal of the liquidity in the markets is created not by the monetary authorities, but by the participants themselves, and works through a simple […]
Read more...The financial press has fretted that the problems in the subprime market may spread to other parts of the mortgage market. While defaults and delinquencies aren’t contagious, investors can get nervous and decide they may have been overly optimistic about risks in safer parts of the market. But the next likely casualty isn’t higher grade […]
Read more...Time to eat a little crow. I had a few past posts worrying about the unwinding of the carry trade. Even though the yen has been moving upwards, and the financial press keeps citing the carry trade as a contributor to the turbulence in the markets, two sources I consider well informed, one John Dizard […]
Read more...An excellent piece today by John Authers in the Financial Times, “Look to US for clues on whether sky is about to fall.” It’s not that he covers new ground, but he does a very good job of characterizing the current state of affairs. However, the piece falls just short of something you could share […]
Read more...The Wall Street Journal discussed the role of the carry trade in Thursday’s issue, quoted below, and Friday’s Financial Times, pointing to overnight trading in Tokyo, says the situation is worsening. The Economist and other financial publications have commented on the magnitude and risks of the carry trade, and how disruptive it could be if […]
Read more...Just a couple of posts ago, we complained about Bernanke talking up the stock market. While that may indeed have been what he was doing (and we don’t approve of that), he may also have been trying to slow action in the credit markets, and that is a legitimate use of his power of the […]
Read more...We’ve taken note of excessive optimism and leverage (see, as examples, “The Rising Tide of Liquidity” and “More Signs of a Toppy Market“). Now the European Central Bank is also sounding cautionary notes. Ever since Alan Greenspan’s famous “irrational exuberance” observation produced a 140 point (then 2%) fall in the Dow, central bankers have been […]
Read more...