By way of background, Bill Gross is something of a legend in the fixed income world. He founded Pimco, one of the biggest and most highly respected fixed income firms, with nearly $700 billion under management. Gross is also its chief investment officer and is considered very savvy (and as important for the purposes of […]
Read more...Ooh, when it rains, it pours. First Bear, now this. However, readers of this blog will know we have been posting for some time on rampant liquidity, inadequate risk premia, lax lending, and overvalued assets every where you look. We thank Michael Panzner of Financial Armageddon for pointing out this story from the UK’s Telegraph. […]
Read more...I’ve seen this factoid before, but lifted this recounting from Monday’s editorial in the Financial Times, “Why finance will not be unfettered“: According to the McKinsey Global Institute, the ratio of global financial assets to world output soared from 109 per cent in 1980 to 316 per cent in 2005. The value of the global […]
Read more...A good post from John Hussman at Seeking Alpha. He thinks we are on the verge of a sharp and overdue correcttion: In the microscopic focus on day-to-day fluctuations in the market, it is easy to overlook how unusual — specifically, unusually unfavorable — current market conditions are from a long-term historical perspective. The S&P […]
Read more...One of the hopes, or more accurately, fantasies of a few months ago was that increased business investment would offset slowing consumer spending. This forecast defied basic logic. Why would businesses take on more risk if consumer buying, the big driver of the economy, was sluggish? One would expect lower rather than higher capex. And […]
Read more...In case you missed it, the US stock market was rattled by the continuing aftershocks of the Bear Stearns subprime-related hedge fund fallout, with the Dow down 185, and Bear itself was down in line with the Dow (both fell 1.4%, although Bear was up slightly in the aftermarket at this hour). Now the odd […]
Read more...One of the reasons the US market traded down today was fears the LBO boom is coming to an end, and support for that thesis came in a Bloomberg story, “Thomson Learning Shows `Breaking Point’ for Junk Debt.” Three deals, Thomson Learning, US Foodservice, and Dollar General, are having trouble finding lenders on terms recently […]
Read more...The Economist takes a detached, often ironic, tone in its articles. So when one reads a piece that exudes worry, as this week’s “Bearish Turns” does, it’s noteworthy. The piece recites a litany of likely developments in the credit markets, all negative: the indeterminate state of the Bear Stearns subprime hedge funds; the near-certainty of […]
Read more...It turns out you have every reason to be confused. Even the data watchers can’t agree, which makes one wonder how the Fed can make sense of our situation. Barry Ritholtz at Seeking Alpha give us this recap: Over the years, we’ve looked at — and coined one or two — terms for the current […]
Read more...The Financial Times and the Wall Street Journal give complementary updates on the unraveling of the Bear Stearns subprime hedge funds, the larger of which was the High Grade Structured Credit Strategies Enhanced Leverage Fund. Merrill Lynch and Deutsche Bank put up over $1 billion in assets seized from the funds for sale today. Some […]
Read more...In recent years, financial services firms have become increasingly adept at the game of “pin the liability on the bagholder.” Wall Street players structure complicated new products and seem peculiarly able to strip a disproportionate share of the economic value out as up-front fees. I say “peculiarly” simply because investors buy this stuff, even the […]
Read more...One of New York’s features is its acute housing cycle, a function of the local economy’s dependence on Wall Street. So the sounds of pain coming from real estate professionals are not unfamiliar. A point occurs in every cycle where the brokers, perennial optimists, can no longer deny how bad things are. It’s partly because […]
Read more...Marc Faber, who likes a colorful turn of phrase, has a sobering piece in the Financial Times, “Market insight: Beware the driving forces behind surging asset prices.” He looks at the symptom of pervasive asset bubbles (at least until US housing started unravelling) and traces it back to rapid money supply growth, which produced the […]
Read more...A Bloomberg story tells us that Japanese retail investors are undermining the forecasts (and worse, trades) of large investment banks. The banks think the yen is seriously undervalued. Unfortunately, when it appreciates, retail investors buy more assets in countries that offer more yield, which leads them to sell yen, keeping the currency in its place. […]
Read more...I know we are in the midst of a classic pattern, but it is still mystifying to watch it operate. At the end of a cycle, bonds start to decline in price before the equity market starts to fall. One would think that this sequence was sufficiently well established that the time lag between the […]
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