From the FT
We should not be surprised to discover that the greatest global believers in capitalism will be in Asia. But it will be an Asian mix of capitalism, not the western formula, that will become the dominant form of global capitalism, where the “invisible hand” of free markets will be balanced by the “visible hand” of good governance.
There will be no ideological trumpeting of the virtues of Asian capitalism. After their experiences of the past 100 years, Asians are wary of ideology. They prefer the simple, commonsense approach of learning from experience and they will heed the advice of Adam Smith, who said that prudence is “of all virtues that which is most useful to the individual”. It may also be helpful to nations.
Showing posts with label Credit Markets. Show all posts
Showing posts with label Credit Markets. Show all posts
Saturday, March 21, 2009
Tuesday, March 17, 2009
Jim Rogers says...we're in trouble
In an interview with Bloomberg TV, aired Tuesday, Rogers says the US risks sending the world into a depression as its bailouts of failed companies rob healthy businesses of capital, and urges Washing to let AIG - which notched up the biggest Q4 loss in corporate history - go bankrupt:
“The US is taking assets from competent people and giving them to incompetent people,” said Rogers, chairman of Singapore-based Rogers Holdings and author of books including Investment Biker and Adventure Capitalist. “That’s bad economics”.
In other cheery remarks, there were lots of dire warnings but not many solutions in Rogers’ predictions that the US is repeating the mistakes made by Japan in the 1990s and risks creating “zombie banks” by rescuing failed financial services companies that should have been allowed to go under.
His most useful point is possibly that we should all be buying farms and agricultural producers.
And in a characteristically counter-intuitive tack, Rogers warns that oil prices (now floundering around $47 a barrel after last year’s highs of more than $147), may rise to record levels due to waning reserves and a lack of major field discoveries: “Reserves of oil are going down all over the world…The price of oil has to go much, much higher. I don’t know if the oil price will go up to record level in three years or five years. I don’t know when but I know it is.”
Finally, the spectre of inflation also disturbs Rogers - although he owns gold and silver, he adds, calls to return to the gold standard are “not going to solve our problems”:
“People should be prepared for inflation as governments worldwide are printing money to prop up economies at a time when commodities supply is under pressure…We’re going to have serious, serious inflation down the road… I wish I knew when.”
Thanks, Jim.
And here are Rogers’ other main points, courtesy of FirstAdopter:
- This is a bear market rally that can last days, weeks, even months
- He is worried about government debt market. In a few months, they have quintupled government debt
- Massive short squeeze on the U.S. dollar from forced liquidation. It’s an artificial rally
- He owns the yen and the dollar, not sure where to put the money. Maybe real assets
- The only asset class that has fundamentals improving are raw materials and commodities
- He owns some gold, but thinks there is more money to be made in agriculture and silver. IMF is trying to sell their gold, which may hurt it for a while
- Central bank is trying to keep interest rates down, but eventually it will backfire and rate will go through the roof
- If you write-off everything in sight, sure you can show a profit [talking about C, BAC, and JPM saying they are profitable in January and February 2009]
- He is short JPMorgan and covered his Citigroup. He thinks they have gigantic derivatives and off balance sheet exposure, also large credit card division which will be bad
- No position in insurance companies
- Best economic sector in the world next 10-20 years is agriculture and farming. Low inventories and tons of shortages
Sunday, March 15, 2009
Tuesday, March 10, 2009
Renewed fears rattle through credit markets
BOYD ERMAN
Tuesday, March 10, 2009
CAPITAL MARKETS REPORTER
Credit markets are lapsing into a renewed slump, stymieing central bankers who have gone to unprecedented lengths to get money flowing into the economy.
After taking some baby steps toward normalcy in the first months of 2009, the market for risky corporate debt such as junk bonds is again seizing up, pushing interest rates higher for those companies lucky enough to find financing and threatening to leave many borrowers shut out. The premium that investors are demanding to buy junk bonds has jumped to 19 percentage points above government bonds from 16 points just three weeks ago.
Investors also fear more financial institutions may fail, sending measures of the risk of bank bonds to record highs. At the same time, the rising cost of interbank lending signals bankers are again growing leery of one another. Banks are now charging 1.31 per cent interest to lend each other U.S. dollars for three months, up from a recent low of 1.09 per cent in mid-January.
About the only debt that investors will buy is the two-year U.S. Treasury, traditionally seen as the safest of all havens.
The flow of money out of risky assets into only the safest exacerbates the economic malaise by making it tough for companies to raise money to expand or even to just stay alive, forcing them to cut jobs and spending to cope.
For Canadian companies that need to refinance debt soon, such as miner Teck Cominco Ltd., the renewed troubles in the credit market are bad news.
"Against a background of worsening fundamentals, a poor fourth-quarter earnings season - thankfully drawing to a close - and the spreading of the crisis's tentacles far, wide and deep, more areas of the credit market are starting to feel the strain," said Suki Mann, a credit strategist at Société Générale in London.
The rapidly worsening recession is one reason for the latest slump in credit markets, with the World Bank yesterday saying that the global economy will shrink in 2009 for the first time since the Second World War.
But analysts say the underlying problem is that while central banks such as the U.S. Federal Reserve are pushing hard to get the economy going again with rate cuts and by printing money, the U.S. government is sabotaging those efforts by failing to lay out a clear and credible plan to deal with problem banks.
"This is really uncharted territory," said Michael Devereux, a University of British Columbia economics professor and a Bank of Canada research fellow. "Most economists would have expected that with this level of expansionary monetary policy and expansionary fiscal policy, we would have started to see some things happen."
The issue for many investors, he said, is "the critical steps to fix the banks have not been taken, and because of that there's just no possibility of a resurgence of financial confidence."
Impatient credit investors panned the announcement yesterday by the Obama administration that Treasury Secretary Tim Geithner will unveil his plans for fixing the banking system in "coming weeks."
"Perhaps the market is pushing, in a free-market manner, the government to make the decisions sooner rather than later," said Tim Backshall, chief strategist at Credit Derivatives Research, a California firm that tracks debt markets.
In the meantime, hard-won gains in confidence from late 2008 and early 2009 are bleeding away.
The Credit Derivatives Research Counterparty Risk Index, a measure of investor fears that banks will fail, rose to a record high yesterday, led by concern that Citigroup Inc. might not make it after posting $28.5-billion (U.S.) of losses since the credit crunch began.
And despite perceptions that Canada's banking system is safer than any, the cost of insuring against a default on five-year debt issued by the country's largest bank, Royal Bank of Canada, also rose to a record yesterday, according to Markit Group Ltd.
That means banks will have to pay more to raise funds, leading to higher rates for borrowers, and many companies that depend on debt will have trouble rolling over loans.
The result is that no matter how much central bankers slash their targets for rates, the economy will struggle until credit markets are fixed because companies will cut jobs, close factories and put off expanding to hang onto what little cash they have.
Tuesday, March 10, 2009
CAPITAL MARKETS REPORTER
Credit markets are lapsing into a renewed slump, stymieing central bankers who have gone to unprecedented lengths to get money flowing into the economy.
After taking some baby steps toward normalcy in the first months of 2009, the market for risky corporate debt such as junk bonds is again seizing up, pushing interest rates higher for those companies lucky enough to find financing and threatening to leave many borrowers shut out. The premium that investors are demanding to buy junk bonds has jumped to 19 percentage points above government bonds from 16 points just three weeks ago.
Investors also fear more financial institutions may fail, sending measures of the risk of bank bonds to record highs. At the same time, the rising cost of interbank lending signals bankers are again growing leery of one another. Banks are now charging 1.31 per cent interest to lend each other U.S. dollars for three months, up from a recent low of 1.09 per cent in mid-January.
About the only debt that investors will buy is the two-year U.S. Treasury, traditionally seen as the safest of all havens.
The flow of money out of risky assets into only the safest exacerbates the economic malaise by making it tough for companies to raise money to expand or even to just stay alive, forcing them to cut jobs and spending to cope.
For Canadian companies that need to refinance debt soon, such as miner Teck Cominco Ltd., the renewed troubles in the credit market are bad news.
"Against a background of worsening fundamentals, a poor fourth-quarter earnings season - thankfully drawing to a close - and the spreading of the crisis's tentacles far, wide and deep, more areas of the credit market are starting to feel the strain," said Suki Mann, a credit strategist at Société Générale in London.
The rapidly worsening recession is one reason for the latest slump in credit markets, with the World Bank yesterday saying that the global economy will shrink in 2009 for the first time since the Second World War.
But analysts say the underlying problem is that while central banks such as the U.S. Federal Reserve are pushing hard to get the economy going again with rate cuts and by printing money, the U.S. government is sabotaging those efforts by failing to lay out a clear and credible plan to deal with problem banks.
"This is really uncharted territory," said Michael Devereux, a University of British Columbia economics professor and a Bank of Canada research fellow. "Most economists would have expected that with this level of expansionary monetary policy and expansionary fiscal policy, we would have started to see some things happen."
The issue for many investors, he said, is "the critical steps to fix the banks have not been taken, and because of that there's just no possibility of a resurgence of financial confidence."
Impatient credit investors panned the announcement yesterday by the Obama administration that Treasury Secretary Tim Geithner will unveil his plans for fixing the banking system in "coming weeks."
"Perhaps the market is pushing, in a free-market manner, the government to make the decisions sooner rather than later," said Tim Backshall, chief strategist at Credit Derivatives Research, a California firm that tracks debt markets.
In the meantime, hard-won gains in confidence from late 2008 and early 2009 are bleeding away.
The Credit Derivatives Research Counterparty Risk Index, a measure of investor fears that banks will fail, rose to a record high yesterday, led by concern that Citigroup Inc. might not make it after posting $28.5-billion (U.S.) of losses since the credit crunch began.
And despite perceptions that Canada's banking system is safer than any, the cost of insuring against a default on five-year debt issued by the country's largest bank, Royal Bank of Canada, also rose to a record yesterday, according to Markit Group Ltd.
That means banks will have to pay more to raise funds, leading to higher rates for borrowers, and many companies that depend on debt will have trouble rolling over loans.
The result is that no matter how much central bankers slash their targets for rates, the economy will struggle until credit markets are fixed because companies will cut jobs, close factories and put off expanding to hang onto what little cash they have.
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