Do the smaller deals have better escape hatches, or are the IBs betting that the seller and/or private equities folks are unwilling to litigate over them?
Fed keeps cutting and it will force savers to jerk money out of the bank and put it to work in the casio stock exchanges. I'm thinking deposits will decline and reserves will need to be shored up, unless the Fed decides reserves can get lower as defaults increase geometrically.
RTC - V2.0
Will Siedman be pulled out of retirement and drafted into service?
Look for the TXU deal to unravel too. It didn't make that much sense before they cancelled the coal plants planned in order to placate the greenies, and even less now.
CR: can we have a thread on one of the following topics maybe to balance the view somewhat?
The CPI for August came in below estimates and is rising at a 2.0% rate year-over-year, well below the long-term average of 3.1%. The 10-year/TIPS spread, a gauge of inflation expectations, is falling 6 basis points, to 2.32%. However, the 10-year yield is rising 5 basis points on a flight from safety. The dollar-based three-month Libor rate is plunging 35 basis points today, to 5.24%, the lowest since May 2006. The 10-year swap rate is plunging 12% today, to 60.25 basis points, over Treasuries. The 30-year average jumbo fixed-rate mortgage is dropping another 8 basis points today, to 7.03%, down 31 basis points in six days.
Some fallout from the rate cut that we could have expected. Surprised it took the Saudis a whole day.
"...signalling that the oil-rich Gulf kingdom is preparing to break the dollar currency peg in a move that risks setting off a stampede out of the dollar across the Middle East..."
Hey O-Joe, how 'bout we just regurgitate the latest pablum from Kudlow? (comments from National Review online)
Ben Bernankes shock-and-awe, frontloading action to slash the fed funds rate 50 basis points from 5.25 percent to 4.75 percent (which I predicted, see Goldilocks 2.0) is just what the doctor ordered.
This is Mr. Bernankes coming out party. Its his Fed now. In one fell swoop, yesterdays move wiped Alan Greenspan off the front pages (thankfully).
Tuesdays Feds action ultimately boosts financial confidence and reduces the cost of money. This in turn will help stabilize, even boost asset values across-the-board. It moves us away from the punitive inverted yield curve. Its pro-growth and it will increase the demand for money by reducing the interest cost of money.
Tight money had been strangling the low tax rate on capital and investment. So the Feds easing move will revive the investment incentive effects from the supply-side tax cuts. The idea here is that the Fed had been squelching them and now is liberating them. Now the reduced interest tax on money has become more compatible and congenial with the low tax rate cost on capital.
The inflation hawks out there will be disappointed because stronger investment and growth will absorb liquidity and reduce the inflation rate.
Across the pond, the European Central Bank and the Bank of England may follow Bernankes lead. They of course are suffering from the same problems we are.
I think this is ultimately bullish for stocks, bullish for the economy, bullish for the dollar, and bearish for gold. It will take some time for these things to work themselves out, but these are my expected outcomes.
Kudlow needs to go straighten out the Saudi's ref sterlingerl's post above...that would not only decouple the dollar from ME currencies, but ultimately blow away the dollar as the currency of choice for trading oil.
"We're in some pretty sh!t now, man!" -Cpl. Hudson
All these are quite bullish events I feel not correctly reflected in your esteemed blog.
Falling rates are not obviously bullish. Falling rates, falling inflation, and recessions all go hand in hand. It doesn't mean we are heading into a recession, but it does little to alter the possibility.
It is your "opinion" that they are bullish events. It is not a fact. If only people could entertain the notion that they might be wrong. There doesn't have to be a black and white. It is possible to be 40% bullish and 60% bearish. That's how risk/reward is supposed to work.
The data has not changed my bearish "opinion" on our future. The housing component of the CPI was flat. It has me thinking of switching from stagflationist to deflationist.
Stagflation was one of the best things to bet on during this bull market but I think that there's a potential that the ride (in gold, oil, silver, AND housing) is coming to an end.
The stagflation of the 1970s did not end with a bull market. It ended in recession. Hard assets broke. The bull market started once the recessionary smoke cleared.
That's what I'd choose to be optimistic about, but I will admit there are no certainties. Can you?
As long as ECRI does not signal a recession we're pretty safe there will be none in the next 12 months.
If you couple this with the fact that the FED has already started cutting rates, everything looks like a mid-cycle downturn similar to 1995 with below-par, but above-recession growth, let's say ~2.5% GDP growth.
I think that's why the growth side of the market is now outperforming value, for they do particularly well in such an environment.
Let's worry about a recession in due time, thus after the current slight downturn and another upturn into 2010. Therefore, I wouldn't worry about deflation to begin with.
ECRI index diving..."The ECRI's leading U.S. index has trended lower. The gauge's annualized growth rate has dived to 0.6% on Aug. 31 from 6.9% in mid-June. But Achuthan says that signals a slowdown, not a recession."
I am not sure when it signals recession,maybe below zero. If that is the case at the rate it is falling it will be there shortly, if not already.
O Well...
Do the smaller deals have better escape hatches, or are the IBs betting that the seller and/or private equities folks are unwilling to litigate over them?
Wow, it's so shocking when deals that are priced for perfection don't work out.
only a mere 750MM?
didn't blackstone get 2B from the chinese? and other Billions elsewhere?
it had more than $1 billion of paper losses on $27 billion of such commitments.
Well, let's see. 25 billion is "more than" 1 billion, is it not?
If these banks are losing between 2.3 to 3.7% on their exposure to these loans, what is Citi losing?
$3.5-5 Billion?
impossible.
the credit markets are unfrozen and all is well in the real and financial economy due to the new FFR of 4.75[/sarcasm]
looks like we need a FFR in the 1% range again? Then again, that's so 2001... let's do a Japan and go to 0.
I've learned my lesson.
I'm all in the markets, and gold.
OT,
So when are we going to see the next round of stats on ABCP - both the total outstanding and the term?
I was wondering the same thing as energyecon. Why haven't the CP Outstandings been released yet?
Fed keeps cutting and it will force savers to jerk money out of the bank and put it to work in the casio stock exchanges. I'm thinking deposits will decline and reserves will need to be shored up, unless the Fed decides reserves can get lower as defaults increase geometrically.
RTC - V2.0
Will Siedman be pulled out of retirement and drafted into service?
Look for the TXU deal to unravel too. It didn't make that much sense before they cancelled the coal plants planned in order to placate the greenies, and even less now.
Hay LBO people wake up!
Time to move on to the latest get-rich-quick scheme
.
There's nothing more shameful than somebody still trying to run a busted con.
CR: can we have a thread on one of the following topics maybe to balance the view somewhat?
The CPI for August came in below estimates and is rising at a 2.0% rate year-over-year, well below the long-term average of 3.1%. The 10-year/TIPS spread, a gauge of inflation expectations, is falling 6 basis points, to 2.32%. However, the 10-year yield is rising 5 basis points on a flight from safety. The dollar-based three-month Libor rate is plunging 35 basis points today, to 5.24%, the lowest since May 2006. The 10-year swap rate is plunging 12% today, to 60.25 basis points, over Treasuries. The 30-year average jumbo fixed-rate mortgage is dropping another 8 basis points today, to 7.03%, down 31 basis points in six days.
Between the Hedges
All these are quite bullish events I feel not correctly reflected in your esteemed blog.
Thanks.
O-Joe
Conforming loan increase best temporary: Bernanke
Conforming loan increase best temporary: Bernanke
| Reuters
Benny you have zero credibility when it comes to moral hazard so just shut up and play ball.
Some fallout from the rate cut that we could have expected. Surprised it took the Saudis a whole day.
"...signalling that the oil-rich Gulf kingdom is preparing to break the dollar currency peg in a move that risks setting off a stampede out of the dollar across the Middle East..."
Fears of dollar collapse as Saudis take fright - Telegraph
Savers? What, there's more than one fool like me with money in the bank?
Who knew?
I dunno, I think I'll go stock up on twinkies. They last forever and will sell great to the guys in the welfare line on the street....
Hey O-Joe, how 'bout we just regurgitate the latest pablum from Kudlow? (comments from National Review online)
Ben Bernankes shock-and-awe, frontloading action to slash the fed funds rate 50 basis points from 5.25 percent to 4.75 percent (which I predicted, see Goldilocks 2.0) is just what the doctor ordered.
This is Mr. Bernankes coming out party. Its his Fed now. In one fell swoop, yesterdays move wiped Alan Greenspan off the front pages (thankfully).
Tuesdays Feds action ultimately boosts financial confidence and reduces the cost of money. This in turn will help stabilize, even boost asset values across-the-board. It moves us away from the punitive inverted yield curve. Its pro-growth and it will increase the demand for money by reducing the interest cost of money.
Tight money had been strangling the low tax rate on capital and investment. So the Feds easing move will revive the investment incentive effects from the supply-side tax cuts. The idea here is that the Fed had been squelching them and now is liberating them. Now the reduced interest tax on money has become more compatible and congenial with the low tax rate cost on capital.
The inflation hawks out there will be disappointed because stronger investment and growth will absorb liquidity and reduce the inflation rate.
Across the pond, the European Central Bank and the Bank of England may follow Bernankes lead. They of course are suffering from the same problems we are.
I think this is ultimately bullish for stocks, bullish for the economy, bullish for the dollar, and bearish for gold. It will take some time for these things to work themselves out, but these are my expected outcomes.
Feel better?
Didn't the BoE just vote to hold rates? Bah.
Bailing on the deals is (in the long run) good for the IBs, but it'll be hell on their bonuses this year.
"how 'bout we just regurgitate the latest pablum from Kudlow? (comments from National Review online)"
How on earth can Kudlow say all that?!> Is he that stupid?
Kudlow needs to go straighten out the Saudi's ref sterlingerl's post above...that would not only decouple the dollar from ME currencies, but ultimately blow away the dollar as the currency of choice for trading oil.
"We're in some pretty sh!t now, man!" -Cpl. Hudson
O-Joe,
All these are quite bullish events I feel not correctly reflected in your esteemed blog.
Falling rates are not obviously bullish. Falling rates, falling inflation, and recessions all go hand in hand. It doesn't mean we are heading into a recession, but it does little to alter the possibility.
It is your "opinion" that they are bullish events. It is not a fact. If only people could entertain the notion that they might be wrong. There doesn't have to be a black and white. It is possible to be 40% bullish and 60% bearish. That's how risk/reward is supposed to work.
The data has not changed my bearish "opinion" on our future. The housing component of the CPI was flat. It has me thinking of switching from stagflationist to deflationist.
Stagflation was one of the best things to bet on during this bull market but I think that there's a potential that the ride (in gold, oil, silver, AND housing) is coming to an end.
The stagflation of the 1970s did not end with a bull market. It ended in recession. Hard assets broke. The bull market started once the recessionary smoke cleared.
That's what I'd choose to be optimistic about, but I will admit there are no certainties. Can you?
Stagflationary Mark:
As long as ECRI does not signal a recession we're pretty safe there will be none in the next 12 months.
If you couple this with the fact that the FED has already started cutting rates, everything looks like a mid-cycle downturn similar to 1995 with below-par, but above-recession growth, let's say ~2.5% GDP growth.
I think that's why the growth side of the market is now outperforming value, for they do particularly well in such an environment.
Let's worry about a recession in due time, thus after the current slight downturn and another upturn into 2010. Therefore, I wouldn't worry about deflation to begin with.
O-Joe
O-Joe,
I respect your answer. I just happen to disagree.
We all can't clearly have the same opinion or the market would either drop to zero or go to infinity, lol.
.
As long as ECRI does not signal a recession we're pretty safe there will be none in the next 12 months.
O-Joe
Optimistic Joe
And as long as paramedics aren't using the jaws of life to pry me out of my car I'm pretty confident I haven't been in an accident.
The headline should have read "Bankers act Prudently!" which has been a good deal rarer than "man bites dog" the last few years.
O Joe,
ECRI index diving..."The ECRI's leading U.S. index has trended lower. The gauge's annualized growth rate has dived to 0.6% on Aug. 31 from 6.9% in mid-June. But Achuthan says that signals a slowdown, not a recession."
I am not sure when it signals recession,maybe below zero. If that is the case at the rate it is falling it will be there shortly, if not already.
ECRI | News | Professional Reports
Stag Mark,
When the US consumer gets "tapped out" aggregate demand will fall, and prices should follow. DEFLATIONARY. You should go ahead and change your name.
O Joe,
When ECRI signals Recession how long until the onset?
March 2000 SPX registered new all time high and ECRI only pronounced the R word one year later