Readers of this blog know that I have been concerned about the state of the credit markets for some time. We’ve had (until the last month or so), rampant liquidity feeding asset bubbles in virtually every asset class except the dollar and the yen, tight risk spreads (that means inadequate compensation for risk assumption), lax […]
Read more...Bloomberg reports that Moody’s has dropped its ratings on 399 subprime related bonds and is reviewing ratings on another 32. Standard & Poors had announced earlier in the day that it is preparing to cut ratings on 2.1% of the bonds that have subprime exposure, or roughly $12 billion out of a universe of $565 […]
Read more...John Dizard, who writes a pretty-much-weekly column for the Financial Times, typically presenting an exotic investment idea, has long given me the impression he spends much of his day gossiping with people on trading desks. Which means he is very much plugged in, and some of the remarks he makes in passing can be more […]
Read more...Ciitgroup CEO Charles Prince, in an exclusive interview with the Financial Times, said something I expect he will come to regret: Chuck Prince on Monday dismissed fears that the music was about to stop for the cheap credit-fuelled buy-out boom, saying Citigroup was “still dancing”. The Citigroup chief executive told the Financial Times that the […]
Read more...I’ll be brief in introducing this story on leveraged loans in today’s Financial Times, but you might also want to view its companion piece, a story on Citigroup CEO Chuck Prince’s remarks on this market. Leveraged loan prices are at their lowest point since the start of the Gulf War. Some see it as a […]
Read more...Another day, another gloomy housing forecast? The Freddie Mac prediction, that housing sales in the US will total 6.28 million, would be the lowest level since 2001. Not surprisingly, the agency attributed the expected decline to higher interest rates and more stringent lending standards. The report also said Freddie Mac’s home price index, for houses […]
Read more...Thanks to Seeking Alpha, we have a recap of a Barron’s story, “Why a Housing Recovery is Far Off.” Aside from a stern warning in the Economist in 2005 about the US housing bubble, which declared the market to be 20% overvalued and added that when housing bubbles correct, prices often below “fair” value, in […]
Read more...I find it interesting when factoids that are already in the public domain get treated as if they are news. Stephanie Pomboy, as reported by Barron’s Alan Abelson (hat tip Barry Ritholtz) tells us that there are a lot of adjustable rate mortgages that have no equity. And, of course, if housing prices fall, more […]
Read more...The May retail sales reports, which showed the biggest gain in over a year, was generally greeted by investors as a sign of economic resilience. However, the skeptical sorts, looking at overextended consumers, lousy first quarter GDP stats, not particularly strong (and dubious) job growth reports, argued that if you looked at April and May […]
Read more...Because American consumers kept spending, in the face of 9 quarters of negative savings, falling housing prices, rising interest rates, rapidly increasing food and energy costs, and decelerating GDP growth, many economists appeared to believe they could continue to defy gravity. This MarketWatch story’s subtitle, “Signs of household stress are all around.” confirms that reality […]
Read more...That’s the question raised by the Financial Times’ capital markets editor Gillian Tett in a short update on rating agencies, and it’s an important one. As we discussed earlier, the credit markets have come to depend on rating agencies: If a terrorist were to blow up Moodys, S&P, and Fitch, it would have a devastating […]
Read more...OK, schizophrenia is a bit too strong a word, but it got your attention, right? “Dissonance” is closer to the mark, and differing points of view in a plugged-in, market-savvy paper like the Financial Times is an interesting sight to behold. Both stories address the same general topic, namely, whether the current mess in subprimes […]
Read more...Warning: this post is only for those with sound constitutions. Tim Lee, head of a financial economics consultancy, tells us in a Financial Times article what a carry trade unwind will look like (answer: very nasty) and what it would take to prevent it (the Japanese have to allow a high enough level of inflation […]
Read more...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. […]
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