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 […]
Read more...I’ve been waiting for estimates of what the impact of a pandemic would be. Although the swine flu has now been elevated by the WHO to pandemic status, it’s far too early to say what that might mean in costs, both lives and dollar costs. Moody’s has made a first cut. From the Financial Times: […]
Read more...Forgive me for sounding even crankier than usual, but the reason deception sells is that so many people line up for it. The release claiming to describe how the stress tests were conducted in fact provided no new information. Some analysts were more than a tad dismissive: The central bank released a so-called white paper […]
Read more...The obstacle to a bailout of Chrysler is the still large bid and ask spread between what the secured creditors are now willing to agree to in the way of a haircut, versus what Treasury is willing to give them. The drop dead date is next Thursday. But news reports tonight differ on what a […]
Read more...A 1.3% fall in global GDP may not sound that bad to some readers, but in fact it is a horrid outcome. Most of us deal with advanced economy growth statistics, which are lower than those of emerging economies. And a negative world result of this level again confirms the sychronized nature of this contraction. […]
Read more...In America, the 1990 census showed a marked decrease in childbearing. 25% of the women between 30 and 34 were childless, while the comparable figure in 1976 was 16%. By 1985, the birthrate expected per average woman over her lifetime had fallen to 1.8, slightly below Europe’s level and below the “replacement rate”, the level […]
Read more...We said at the beginning of April, when the idea of a “surgical” bankruptcy of GM and Chrylser was first mooted, that we assumed this was an effort at high stakes poker, because there was simply no way to make reality conform with the Administration’s fantasy. Readers may recall that the high concept was a […]
Read more...Readers may know we have oft pointed to the work of Carmen Reinhart and Kenneth Rogoff on financial crises. They have built a large database of past crises, and have compared the US to past crises countries. Their conclusion was that the US looked like a typical crisis country “only more so”, and in two […]
Read more...KBW, a firm specializing in bank stocks, expects Wells Fargo to show $120 billion in “stress test losses”, meaning losses under the assumption of a supposed worst case of recession through the first quarter of 2010 and unemployment reaching 12%. Note that the 12% figure (according to Bloomberg) was included in the analyst’s report;. This […]
Read more...We’ve mentioned earlier that it was inevitable that China would reduce its purchases of Treasuries, independent of its desire to diversify away from them. With trade falling (although China still has a high surplus) and hot money inflows reversing direction, China has less reason to buy foreign assets. From the New York Times: Reversing its […]
Read more...Willem Buiter takes no prisoners, In his latest post, “The green shoots are weeds growing through the rubble in the ruins of the global economy”, he dispatches the idea that recovery is around the corner (citing Carmen Reinhart and Kenneth’s latest paper on the resolution of financial crises) and points out that the fiscal state […]
Read more...Barry Eichengreen, an expert on the Great Depression, and Kevin O’Rourke, take issue with the notion that the current downturn is less severe than the Great Depression. While the slump in the US is not as bad, that mis-states the global picture. Note that many economists expect the US to suffer less than the big […]
Read more...Note that the 53% cumulative default rate for junk bonds over the next five years foreseen by Deutsche Bank analyst Jim Reid is nearly twice the level forecast by Moodys of 29%, It is also well in excess of the rate during the S&L crisis, which produced a nasty but comparatively short recession. From Bloomberg: […]
Read more...Submitted by Rolfe Winkler, publisher of OptionARMageddon. [Reader note: I thought it useful to add commentary around the FDIC data. Those that would prefer to skip straight to it, see the chart and read paragraphs 4-9]. Conventional wisdom says that financial companies are having trouble borrowing because credit markets are broken. This is dangerously wrong. […]
Read more...In a world of floating rates, driving the value of one’s currency down takes a bit of doing, but as China (since 1994) and Japan (circa 2003) have demonstrated, central banks can lower currency prices. And trashing one’s currency is part of the standard program recommended for countries facing deflation. The preferred method these days […]
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