We have mentioned before that the CDO market, a dark, murky, but rapidly growing part of the financial markets, is looking dodgier by the day. A brief primer: CDOs resemble other structured credits, like mortgage backed securities, in that they are structured into tranches of varying credit quality and maturities. The top tier is often […]
Read more...The funny thing about the oft-repeated George Santayana saying, “Those who cannot remember the past are condemned to repeat it,” is that it is generally applied to historical events, like the folly of launching an attack on Russia that might extend into the winter. But these days, in the financial markets, with so many people […]
Read more...Even though the US Treasury market has taken a nasty downward move through an important level that many participants see as the beginning of a bear market in bonds (which will inevitably lead to a bear market in equities), actors in other sectors of the financial markets seem remarkably sanguine, at least so far. Is […]
Read more...The Wall Street Journal features a story, “Boom Aside, Not All LBOs Look So Hot,” which reports that some LBOs are in trouble a surprisingly short time after the deal closed. Now the Journal goes to some lengths to present these failures as deal specific by stressing that these cases are isolated, the economy is […]
Read more...This story by Tim Bond in Thursday’s Financial Times, provides an excellent explanation of how a change in the universe of bond investors has produced new outcomes, like a difficult-to-explain negative yield curve. It also looks prescient in light of the plummet in long-dated Treasuries that day. Bond’s article says that “long term bonds are […]
Read more...Readers doubtless know that I am very fond of the Financial Times. I therefore find it distressing when a writer, particularly a capable writer, puts out a story that is enough off base as to be misguided. Case in point: “Bulge-bracket banking model has spawned monsters” by Tony Jackson. He is unhappy about the way […]
Read more...CFO.com, in “S&P Junks Investment-grade Ratings,” tells us that that ratings agency is of the view that investment grade borrowers aren’t getting enough of a cost advantage for it to be worth it to them to keep a good bond rating: “Borrowers have taken advantage of the cheap money by increasing leverage to finance dividend […]
Read more...Thanks to Felix Salmon for pointing this tidbit out to us. Due to leveraged buyouts (notice how the press has started to use that 1980s term once again?), there has been a surge in junk issuance. But since below-investment-grade issuers pay only about 180 basis points more than investment grade issuers, there is virtually no […]
Read more...As I have mentioned before, this blog relies a bit more than I’d like on the Financial Times because its writers have a greater understanding of the inner workings of the financial markets and take a jaundiced view of recent developments. One has to wonder if the two traits are linked: if you have a […]
Read more...Unlike its US counterparts, the Financial Times has consistently been on top of the various unsavory elements of the credit market bubble: the near disappearance of risk premia, the growth of leverage on leverage, the lack of investor sophistication. A piece by John Plender does a very good job of connecting some of the dots […]
Read more...One news items that hasn’t gotten much press attention is the effort to close a loophole in the tax code by which the “carried interest” of private equity professionals, which is labor income, gets capital gains treatment. Moreover, the funds are often able to get their regular management fee the same favorable tax treatment as […]
Read more...Although it’s the Dow’s new highs that get the headlines, the really speculative action is taking place in the debt markets. As we have discussed in past posts, lenders and bondholders have abandoned their customary caution and are accepting yields that many feel are inadequate for the risks involved, and are also waiving customary covenants, […]
Read more...Bernanke normally adopts a measured tone and, as befits someone whose words can move markets, takes great care not to dwell too heavily on bad news. So it was suprising to see him issue a fairly pointed statement on risks to the banking system. His remarks on the perils of private equity loans, when taken […]
Read more...It’s quite remarkable how indifferent to bad economic data keeps coming in and the markets keep shrugging it off. And what is of particular concern, if you are the worrying sort, isn’t the peppy equity markets (that’s for the optimistic types anyhow), but the near-total indifference to risk in the credit markets. Aside from a […]
Read more...It’s curious, and telling, that this story, “Union in move to halt Blackstone IPO,” appears as a headline story at this hour for the Financial Times (meaning it will probably be featured in the news summary in the print edition) yet has no counterpart at the Wall Street Journal or New York Times websites. The […]
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