Believe it or not, I found this less downbeat than most economic news du jour. Things are not yet as bad as they have been in past downturns, at least according to the Economist’s house measure: The Economist’s informal R-word index is also sounding alarms. Our gauge counts how many stories in the Washington Post […]
Read more...One of the features that distinguishes a bull market from a bear market is how participants react to news. In upswings, investors either shrug off discouraging information, or at worse show an initial negative reaction, then pile back in. You see the reverse in corrections: securities prices don’t respond to good news, or do so […]
Read more...A Bloomberg story reveals that municipal bonds have lagged other fixed income investments, mainly because important investors, namely hedge funds and banks, are directing capital to other uses (as in saving their hides). Due to their tax-deductible status, munis trade at a lower yield than Treasuries, but that differential has narrowed markedly. Are munis a […]
Read more...This thoughtful article in the Financial Times by Tim Bond, head of asset allocation for Barclays Capital, observes that some obvious fundamental developments haven’t been incorporated into prevailing financial market forecasts, both for developed and emerging markets. It also offers practical investment suggestions in the face of a difficult climate for financial assets. From the […]
Read more...Bloomberg carries a story today, “Treasuries, Oil May Foreshadow Bear Market After Yields Tumble,” that warns that the Treasury rally, driven by a flight to quality, may not simply be short-lived but a precursor to a nasty reversal, particularly on the longer end of the market. It suggests that those that see the recent decline […]
Read more...Another negative for the dollar: it is starting to displace the yen as the funding currency for the carry trade. As most readers probably know, the carry trade is when one borrows in one market that offers low borrowing costs and invest in one with high yields. It is easy money, but comes with the […]
Read more...Another day, another adverse development in the credit markets, or so it seems. Except now we are getting more than one troubling sighting a day. The latest tidings: liquidity in the credit markets is falling to the point where the European Central Bank has announced it will inject new cash. The underlying cause is worry […]
Read more...Maybe it’s the Prozac after all. During the dot-com era, some blamed the ever-levitating market on Prozac. With 28 million prescription written annually, a meaningful proportion of the investing population was on anti-depressants. Perhaps the shift in collective mood was enough to blunt caution. Now I have no idea of the use of antidepressants is […]
Read more...Charles W. Calomiris, the Henry Kaufman professor of financial institutions at Columbia’s business school, has an interesting but ultimately frustrating post at VoxEU in which he argues that the trouble we are seeing in the credit markets is not yet a Minsky moment (in very simplistic terms, the point at which an overlevered and highly […]
Read more...Nouriel Roubini, in his latest post, announces the “massive forthcoming losses” in commercial real estate. Note that the frothiness of commercial real estate has been reported for some time (Fitch first warned about it in April; Roubini made noise about it in July, when Fitch issued a second warning) but the financial media has chosen […]
Read more...Members of the Fed officialdom are doing their best to preserve the Fed’s policy options (i.e, not cave in to market pressures at the next FOMC meeting) by talking down expectations of another rate cut. Dallas Fed President Richard Fisher, in Sydney, spoke of solid US economic fundamentals and increasing inflation risks. Note that Fisher […]
Read more...John Dizard of the Financial Times has a fascinating article in which he goes to the blue-chip art auctions to get a reading of the mood of the Seriously Rich. And what he finds is not encouraging. Even the wealthy are rattled. He also argues that the Euro is overbought and will trade down by […]
Read more...Sometimes I feel like I am beating a dead horse, or in this case, an about-to-be-stillborn one. The leak over the weekend revealed that the sponsors of SIV salvage operation, the so-called Master Liquidity Enhancement Conduit, had come up with a deal structure. That’s an important hurdle, but it still puts the concept a long […]
Read more...The equity markets seem to have finally realized that conditions are ugly in the credit markets, due to get uglier, and the mess will pull down the real economy. And the bad news continues. The dollar index fell to a new low. Wachovia said the value of its subprime securities, largely “super senior” tranches of […]
Read more...The question posed in the headline isn’t exactly the one Gillian Tett and Paul Davies address in a long and worthwhile analysis at the Financial Times, “What’s the damage? Why banks are only starting to uncover their subprime losses.” But that’s because, as the piece make clear, we are only at the end of the […]
Read more...