The Wall Street Journal – Raters Fail to See Defaults Coming History Shows Firms Rarely Anticipate Sovereign Failures But when it comes to government, or “sovereign” debt, it turns out that the ratings—ranging from a lofty triple-A to a lowly double-C—do little to predict whether a nation is going to renege on its debts, the… Continue reading Bashing Rating Agencies
Bloomberg.com – Legg Mason’s Money Funds Exit French Banks as Federated Stays Legg Mason Inc. (LM)’s bond unit said its U.S. money-market funds won’t buy new debt from French banks because it may become to hard to sell if investors grow more bearish on Europe. The company’s Western Asset Management unit, which oversees $109 billion… Continue reading Legg Mason Bails From France
<Click on chart for larger image> The Wall Street Journal – Sudeep Reddy: More Fed Bond Buys Hinge on Inflation, Indicators The Federal Reserve put another round of bond buying on the table this week, but a new program may be further off than eager markets expect. Fed officials would need to see evidence of… Continue reading Inflation Will Determine The Likelihood Of QE3
The Wall Street Journal – The Folly of Economic Short-Termism Easy money and more government spending won’t help. We need policies that encourage long-term productivity growth. Day traders and their acolytes tried to pressure the Federal Reserve to open the money spigots wider this week. They called for QE3, a third round of unprecedented quantitative… Continue reading You Cannot Solve A Debt Problem With More Debt
Bloomberg.com – PBOC Adviser Says China Needs Urgent Review of U.S. Holdings, News Reports China should urgently assess risks from being the main foreign investor in U.S. debt and diversify its foreign-currency reserves more quickly, the Financial News reported today, citing Xia Bin, a central bank adviser. In the short term, China can adjust the… Continue reading China’s View Of Treasuries
The Wall Street Journal – US Junk-Bond Funds Outflow Highest Since 1992 – Lipper Investors took a record $3.43 billion out of mutual funds that focus on high-yield bonds for the week ended Wednesday, according to Lipper, a unit of Thomson Reuters Corp. (TRI, TRI.T). This week’s outflow is the largest since 1992 and follows… Continue reading Mutual Fund Flows
<Click on chart for larger image> Bloomberg.com – Greek Lessons for Italy and Spain A few weeks ago, the troika of the ECB, EU and International Monetary Fund decided to support Greece with a huge follow-up assistance plan. Yet there are two prerequisites for that proposal to succeed that were missing from the initial blueprint:… Continue reading Europe
The Wall Street Journal – Deciphering Jobless Claims’ Mixed Messages Lately, claims have sent a mixed message. The outright level of jobless claims remains uncomfortably high; the four-week average stood at 407,750 as of July 30. By contrast, two years into the last economic recovery, claims had fallen to about 360,000. Still, the pace of… Continue reading Jobless Claims
<Click on chart for larger image> The Wall Street Journal – Swelling Volume Is Telling The stock market’s recent slump has arrived with the soaring trading volume that was conspicuously absent from the early-year advance. Trading volume over the past five days has been more than twice the 2011 average. The recent trading surge signals… Continue reading If Volume Equals Conviction…
The Financial Times – Lex: Federal Reserve: markets get the message If he could speak in plain English, maybe Ben Bernanke would have expressed himself thus: “We have to do something to turn markets round and to put the S&P sovereign downgrade behind us. We do not have time to thrash out a new round… Continue reading What Did The FOMC Really Say In Its Statement?
The Financial Times – Lex: The case for equities v bonds If you hear a television strategist touting the “Fed model” as a justification for buying equities, the best thing to do is switch channel. Focus on a limited time frame, and you might be convinced – as Alan Greenspan once appeared to be –… Continue reading Comparing Bond Yields To Stock Dividend Yields