This story,”Carry trade returns,” comes from the Financial Times’ John Authers. For those new to the term, the “carry trade” in simple terms is when investors borrow in a currency with low interest rates (in this case, the yen) and use the proceeds to make investments in countries where the prevailing interest rates are high […]
Read more...I have lunch from time to time with the inventor of an important class of financial product who currently runs a rather large hedge fund (assets well over $1 billion). He also started out as a Fed economist. It’s important as a trader to have a point of view, but not to get one’s ego […]
Read more...We found Yale economist Robert Shiller’s article, “Fears, Not Facts, Drive Global Markets,” thanks to Economist’s View. As much as we agree with Shiller’s conclusion (as author of the book “Irrational Exuberance,” he is considered an expert), that the size and seeming suddenness of market declines can feed on themselves, we don’t agree with the […]
Read more...A couple of days ago, we took a dim view of an “alarmist” (and more important, inaccurate) analysis of alleged real estate losses at commercial banks. The reason we took issue with it was that is was wrong on several critical counts, and its conclusion was therefore off base. We use the word “alarmist” with […]
Read more...Many observers overlooked the fact that increases in bank reserve ratios in China and India, which reduce liquidity by curtailing how much banks can gear their equity (and banks are much more important financial players in those markets than in the US) plus a teeny interest rate increase in Japan set the stage for the […]
Read more...A short post on Seeking Alpha, “A Play on Subprime Woes and Homebuilders: TOL vs. KBH” that summarizes a Barron’s story on how the subprime saga is developing. It is consistent with what we’ve said in other posts, namely, by itself, the subprime problem isn’t big enough to damage the economy seriously. But the subprime […]
Read more...As readers may recall, Felix Salmon posted a very critical take, “Is there a looming crisis in the mortgage market?” on Gretchen Morgenson’s New York Times story, “Crisis Looms in Mortgages.” We parsed the two stories, drawing on other sources, in our “Reactions to New York Times Mortgage Market Story.” Since then, the markets took […]
Read more...One of today’s lessons is to have greater courage in my convictions. In a number of earlier posts (such as “The Rising Tide of Liquidity,” part 2 and part 3 of the same, “Where Has the (Perception of) Risk Gone“) I pointed to how toppy the markets have been, and how much capital has flowed […]
Read more...The financial press has fretted that the problems in the subprime market may spread to other parts of the mortgage market. While defaults and delinquencies aren’t contagious, investors can get nervous and decide they may have been overly optimistic about risks in safer parts of the market. But the next likely casualty isn’t higher grade […]
Read more...Yesterday, we had a link and some commentary on a front-page New York Times article, “Crisis Looms in Mortgages,” by Gretchen Morgenson. Morgenson likes a take-no-prisoners style of writing, and she tends to be controversial due to her forceful articles about CEO pay. I will confess to having read past it (I am inured to […]
Read more...A good article at Bloomberg, “Bernanke, Greenspan Disagree on Impact of Corporate-Profit Peak,” takes a stab at explaining why, personal issues aside, why the current and former Fed chairman are saying different things about the outlook for the economy. In a nutshell, “It’s the profit margins, stupid.” Corporate profit margins have hit a level unequalled […]
Read more...Gretchen Morgenson, in Sunday’s New York Times, has an excellent front page story, “Crisis Looms in Market for Mortgages.” Her forecast is the worst is yet to come. The story describes how delinquencies in the subprime market, already at 12.6%, are already high (we’ve pointed out before that borrowers are also starting to look shaky […]
Read more...An excellent piece today by John Authers in the Financial Times, “Look to US for clues on whether sky is about to fall.” It’s not that he covers new ground, but he does a very good job of characterizing the current state of affairs. However, the piece falls just short of something you could share […]
Read more...One long-standing skeptic about the housing market is Nouriel Roubini of RGE Monitor. You have to sign up for premium content to get his full story (he does give you an initial free peek), but you can get the drift of the gist from his synopsis, “The housing market is still far from bottoming out:” […]
Read more...As you may well know, Martin Wolf is the Financial Times’ award winning economics editor and their lead economics commentator. He is thoughtful, measured, articulate, and takes far greater pains than many of his peers not to overstate his data. So it was stunning to see at the top of the home page of the […]
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