Greed is good?
Taibbi on Mitt Romney, CDS, financial innovation and much more. . Taibbi writes: “What most voters don’t know is the way Mitt Romney actually made his fortune: by borrowing vast sums of money that other people were forced to pay back. This is the plain, stark reality that has somehow eluded America’s top political journalists for two consecutive presidential campaigns: Mitt Romney is one of the greatest and most irresponsible debt creators of all time. In the past few decades, in fact, Romney has piled more debt onto more unsuspecting companies, written more gigantic checks that other people have to cover, than perhaps all but a handful of people on planet Earth.”
VIdeo below.
PIIGS Bonds, HY Bonds, Bank Bonds, and Recoupling
A few thoughts by Peter Tchir of TF Market Advisors.
Don’t Ignore the Irish Comeback This chart is important for a couple of reasons. The story in Ireland doesn’t get much attention, but what a comeback. The Irish 2016 bonds started the year yielding 7.5% and are now down to 4.43%. So while we are inundated with reports about “Italy is not Greece” we rarely see anything about the improvement in Ireland. Or for that matter, Portugal, where the 5 year bond started the year at 15.6%, peaked at almost 22% and is down to 7.6%. That is still in the danger zone, but a stunning turnaround.
So while it is easy, and even fun to point out how nothing worked in Greece, the situation in Ireland has turned around and even Portugal seems to be coming around. Heck, even the much maligned Greek PSI bonds are getting back to their CDS auction level from March. The “front-end” bonds (which are 2023 maturities) have clawed their way back to 22 from a low of 14, and have actually managed to accrue more than 1% of interest. I’m not making light of the situation there either and think it remains precarious unless the Troika does some form of debt extension (or better yet forgiveness), but there have been signs of slight improvements.
Patience is Running out in Spain and Delays are Costly
Over the past week or so, the market is starting to question whether anything will happen in Spain. The 2016 bond hit a low yield of 4.99% on August 21st and has drifted back to 5.45%. The move in the 10 year is more pronounced as it went from 6.18% to 6.83%.
One encouraging sign is that the 2 year has been pretty stable, moving from 3.42% to 3.59% and the yield here actually declined.
(What if) Everything You Think You Know About China Is Wrong?
With China underperforming almost “everything” lately, maybe the mighty CHina is not as mighty as people perceive it to be? From FP.
For the last 40 years, Americans have lagged in recognizing the declining fortunes of their foreign rivals. In the 1970s they thought the Soviet Union was 10 feet tall — ascendant even though corruption and inefficiency were destroying the vital organs of a decaying communist regime. In the late 1980s, they feared that Japan was going to economically overtake the United States, yet the crony capitalism, speculative madness, and political corruption evident throughout the 1980s led to the collapse of the Japanese economy in 1991.
Could the same malady have struck Americans when it comes to China? The latest news from Beijing is indicative of Chinese weakness: a persistent slowdown of economic growth, a glut of unsold goods,rising bad bank loans, a bursting real estate bubble, and a viciouspower struggle at the top, coupled with unending political scandals. Many factors that have powered China’s rise, such as the demographic dividend, disregard for the environment, supercheap labor, and virtually unlimited access to external markets, are either receding or disappearing. (full article here).
World Market Review – Asia declining….
Guest post by Doug Short. All eight of our benchmark world markets contracted last week. Germany’s DAXK, the best performer, came ever so close to a gain, but at the Friday bell the index closed fractionally below zero, down 0.004%. The S&P 500 was second best, down 0.32%. The Asia-Pacific markets all lost 2% or more with the Nikkei as the worst performer, down 2.54%.
Three indexes on the watch list are in bear territory — the traditional designation for a 20% decline from an interim high. That’s one more than last week. The selloff in the Nikkei 225 dropped Japan below the benchmark level, joining the Hang Seng and Shanghai Composite, the latter of which has taken a long lease on its “bear market” designation. See the table inset (lower right) in the chart below. In our gang of eight, the S&P 500 remains the closest to an interim new high, down a fractional 0.88% from its April 2nd peak. At the other end, the Shanghai Composite is 41% off its interim high of August 2009.
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