Ein trübes Bild. Beosnders die Kombination im Kreditmarkt sieht nach einem in Stein gemeißelten Desaster aus. Klickt bitte auf die Überschrift um den kompletten Bericht zu lesen.
Who Cares? Part I
Jon Markman on the Minyanville Buzz and Banter this morning pointed out a Gallup Poll showing that the general public is more pessimistic about the future today than at any time in the last 15 years.
In a poll last week asking, "In general, are you satisfied or dissatisfied with the way things are going in the U.S. at this time?" a whopping 74% reported dissatisfaction, while only 24% reported satisfaction.
Who Cares? Part II
Question: Why is it lenders don't really seem to care about anything - subprime mortgage woes, potential derivatives dislocations, Bear Stearns?
Answer: Because of a seemingly endless supply of cheap money.
This is generally what is meant when someone says "excess liquidity."
What does such availability of money look like? How does it influence asset prices?
Consider the following from a recent Wall Street Journal Op-Ed piece written by Steven Rattner, managing principal of the private investment firm Quadrangle Group LLC: In 2006, a record 20.9% of new high-yield lending went to weak borrowers with at least one rating starting with a "C." So far this year, that figure is at 33%.
In recent months, lower credit bonds have traded at a smaller risk premium (as compared to U.S. Treasuries) than ever before in history, Rattner wrote.
America's general mood aside, it helps that "money" today is available in quantities, and at prices, never before seen in the modern-day history of financial markets.
Of course, as Rattner pointed out, a mere 0.8% of high-yield bonds defaulted last year, the lowest in modern times.
And so far this year there has been only three defaults.
By comparison, high-yield default rates have averaged 3.4% since 1970.
The result is a familiar cocktail: increased competition among lenders for business resulting in cheaper loans and increasingly relaxed lending standards.
Hmmm. Where have we tasted that combination before?