The Financial Times’ John Gapper had an interesting piece today, “Patience on debt can ease distress.” I’ll give you the section that caught my eye to see if you react to it the same way I did: Last week, I went to a dinner in Manhattan that ostensibly had nothing to do with the credit […]
Read more...The rally in Treasuries, due primarily to a flight to quality by US investors, has masked a troubling trend: a retreat from Treasuries by foreign investors. Today’s Bloomberg story quotes investors openly discussing their disenchantment with the dollar. This is more significant than it might appear. First, this selling of Treasuries is almost certain to […]
Read more...Financial Times writer John Authers passed along an interesting observation from UBS’s George Magnus (the man who popularized “Minsky moment”) about the credit crisis: Issuance of commercial paper – short-term borrowing central to many financial institutions – is drying up, while Libor, reflecting the interest rates at which banks lend to each other, is spiking […]
Read more...In a speech in Hawaii this morning, Philadelphia Fed President Charles Plosser the Fed’s views on stability and monetary policy, and his words were cold cheer to anyone expecting a rate cut. Calculated Risk noted that it was unusual for for a Fed president to speak so directly about monetary policy. Plosser noted that monthly […]
Read more...Experts warn that the boom in commercial real estate prices, fueled by cheap credit, is going sharply into reverse. Fitch had noted as early as April, and again in July that commercial real estate lenders were engaging in the same lax practices that led to grief with subprimes: 0% down, overly optimistic projections, deal terms […]
Read more...John Authers of the Financial Times, in “Market vultures await more blood,” tells us that bottom fishers have been taking a wait-and-see attitude towards the recent market turmoil. While they’ve been able to make handsome profits on certain trades based on the (until a couple of months ago) underpricing of risk, the distressed merchandise pros […]
Read more...This credit contraction is still young, yet we already have the spectacle of a full blown seize up in the money markets which has central bankers flummoxed. Normally, you expect this sort of panic after a few major financial train wrecks and weakness in the real economy. One can cheerily assume that all is for […]
Read more...In an inspired bit of stagecraft, Senate Banking Committee Chairman Christopher Dodd reported today on a meeting with Fed chairman Ben Bernanke and Treasury secretary Henry Paulson that the Fed stood ready to use “all of the tools at his disposal” to address the current money market liquidity meltdown and general credit market distress. This […]
Read more...The Fed’s move on Friday to lower discount rates and its policy shift towards addressing risks to growth has not brought relief to the sector that was in the most distress, the money markets. Panicked action continued Monday, begging the question of what, if anything, the authorities can do. Institutional are fleeing from counterparty risk […]
Read more...Nouriel Roubini and Marc Faber are well known bears, but that fact has not prevented them from being largely right of late. And since the events of the last few weeks have been particularly nerve-wracking, the US media has taken to focusing on the more soothing aspects of news developments, to the extent they can […]
Read more...Given how extraordinary the Fed’s half point (not mere quarter point) discount rate cut of this morning was, and how the markets had been clamoring for it, you’d think we’d see more of a bounce in the Dow than the mere 160 ish points it is up as of this writing (that has come to […]
Read more...I am late to this good comment in the Financial Times, “Hold tight: a bumpy credit ride is only just beginning,” by Avinash Persaud. Between the bumpy markets of the day and arcane workings of Conde Nast’s blog entry system, I’ve been a bit distracted. Admittedly, one of the reasons I view Persaud’s piece favorably […]
Read more...It seems to be a symptom of how stressed the markets are that no matter what the Fed does, it doesn’t seem to work. Jim Cramer and others have been clamoring for the Fed to cut rates to give a sop to the credit markets. Bloomberg tells us (and Felix Salmon was on to this […]
Read more...Nouriel Roubini, on his RGE Monitor, discusses the distinction between risk (variability in outcomes that can be estimated) and uncertainty (unknown or unmeasurable outcomes). Risk can be priced; uncertainty can’t (or at least can’t be priced by rational agents). Roubini argues that part of the panic in the markets stems from the fact that investors […]
Read more...Although it hasn’t gotten much press coverage, Fitch for some time (see here and here) has been warning of lax lending practices in commercial real estate that sound disconcertingly similar to what we’ve seen in subprime. From a July story in the Wall Street Journal: In a report yesterday, Fitch Ratings said the fervid lending […]
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