Should investors be worried about the impending breach of the US debt ceiling? A default would be catastrophic according to numerous news articles I've read recently. Well, to be honest, I didn't read past the first few paragraphs of most of those articles because if you've read one of them, you've read them all. Obviously, a default would be bad [...]
Some wanted to call it China’s Bear Stearns, and over time it may end up being seen that way. And that would be the right way to see it. What Bear’s March 2008 demise had represented was the watershed event for the eurodollar system, the final straw which finally broke the camel’s back. In the same way, CNY's was broken [...]
The corporate junk bubble had gotten so beaten up and so dire that removal of the liquidation pressure was bound to attract bargain hunters and momentum chasers. Despite all that has happened, the lust for huge potential gains remains constant. Where that might have been more expressed upon the short side last year, with the end of the last liquidation [...]
Recognizing the danger of overdoing it on Greece today, I think there is another important and complimentary factor that the uncertainty about default there is revealing. In addition to the economic re-awakening about how nothing much has really changed with Greece, including its fiscal impediments that endure despite its default three years ago, the financial theme that has provided such [...]
With the PBOC’s apparent schizophrenia on display it is unsurprising that there would be another default. I don’t find any coincidence between the timing of that announcement, in Hong Kong, and the fact that the PBOC both “tightened” and “loosened” in the past few days. They have been pretty consistent about that going back to the initiation of “reform” in [...]
As if it needed further reinforcement, the actions of the PBOC follow a simple script – huge monetarism doesn’t work and is ultimately harmful. That is why “reform” in China is being turned into something unrecognizable to the world’s stock investors especially at a time when China’s economy is expressly vulnerable. Only a week or so ago, China’s researchers issued [...]
Perhaps the most animating aspect of bubble complaints is how much the highest risk pieces are exhibiting the lowest risk tendencies. Nowhere is that more evident than leveraged lending, the bank-led syndication of what would otherwise be termed junk. In this repressed environment, anything offering the slightest elevation in return is prized by those starved for it – which is [...]
Chinese financial behavior more recently has been far more favorable than the first part of the year. While there still remains this idea of PBOC control, I think, again, that the second quarter fully bears out the lack of control and the fear that engendered. Very quietly, the PBOC in June rolled out something called the “pledged supplementary lending” program. [...]
Not to revisit Minsky too much, but the crux of the idea is that debt saturation is finite as it can never be uniformly or dynamically efficient. The Chinese seem very much intent on “proving” that idea (as if it needed even more empirical confirmation). Last year Chinese authorities, through various channels, wanted the world to know without a doubt [...]
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