Remember
2007? Not soon enough, I'd wager.
The
Wheels On The Bus:
Six years of free money from the fed fed a mindless search for
returns that built up a junk bond market that is now unraveling.
Exhibit one are the dozens of con artists and true believers who
issued billions in junk bonds to frack for oil that wasn't profitable
at $80 a barrel and is suicidal at $37 a barrel – they'll make
interesting
wallpaper one day soon. But lots of corporations away from the oil
patch jumped into the bond business to finance non-productive
borrowing, much of which will turn out to be ephemera, too. Profits
without products is a form of Ponzi scheme and like all Ponzi's this
one is coming undone.
Exhibit
one was Third Avenue Focused Credit Fund which suddenly announced
that it would no longer let investors get their money back... for a
while. That was followed by similar announcements by a couple of
hedge funds, Stone Lion Capital Partners and LionEye Capital, and
Lucidus
Capital Partners, another high-yield
bond fund.
How
Much How Soon? Moody’s values
the
high-yield bond market at $1.8 trillion – double the $990 billion
in 2008 as the bottom fell out the last time. The question is not
“will the collapse of these bonds spread to the entire bond market,
to stocks, to real estate?” But how far will the damage spread,
how quickly. With
commodities crashing (natural
gas has joined petroleum and coal in the surplus surpluses ring)
a global, er, decline seems most likely. Pray
we don't get Yellen on the TV assuring us that there won't be any
“systemic
contagion this
time.”
-
- - - - / / / / - - - -
Noted:
In
a story about explosives found buried in a clearing in a wooded area
near Fort Leonard Wood, MO was a line about it being near “where
a
man was spotted by a trail camera,,,” A
trail camera? So much for escaping to nature.
Saving
Face:
On
Wednesday the Fed will raise its interest rate for the first time in
nine years. This is not necessary and certainly is not indicated by
wages pushing inflation. It is necessary to save Janet Yelen's face.
So be it. Let's hope it is not 1937 all over again, but if watching
the financial/economic circus teaches us that lessons are never
learned. Enjoy.
90
Day Warranty ?
The Navy's newest combat ship, the $362 million USS Milwaukee, 20
days into its first sea trials suffered a “complete loss of
propulsion” and lay dead in the water. It is being towed back to
port. I hope we kept the receipt.
Plunder:
The head of the World Coal Association says its members should be
the first at the trough, gobbling up clobal
warming funds
to develop “carbon capture and storage” - a process that has
never worked worked
except as pretense to let coal mining continue.
Regulatory
Humor:
Several days late “SEC commission staff” is on site at the
ailing Third Avenue Focused Credit offices and is “closely
monitoring the situation.” They are there to help “ensure...
an orderly process that best protects investors.”
6 comments:
Re: Fed raising interest rates - I don't know much about this stuff, so take it for what its worth. Is it possible the Fed is going to raise the rate *because* things are about to get FUBAR? To give themselves wriggle room in order to bail out the banksters again?
While it's possible that the Fed is raising rates because things are "about to get FUBAR", I more suspect that their raising rates will help things get to FUBAR. Or would, if they weren't already there.
I subscribe to the theory that the Fed is raising rates to keep wages from rising while pretending that the unemployment rate is really 5%. There are no inflationary pressures at present - mainly because unemployment is too high (in reality) to empower workers to seek raises or to leave one job in search for another.
The object continues to be keeping the workers afraid, insecure and docile, just as Greenspan admitted back in the Good Old Days.
The Fed needs to raise rates to maintain credibility. And to give themselves room to lower them again.
A freaking quarter pt. They've been warning wall street for, like, five years.
Sure, this'll dislodge a bit of flotsam, but the insiders have long since priced this in and protected themselves.
re "90 day Warranty": Three weeks, $362 million. Wow, at that rate the Navy's newest destroyer, the Zumwalt, at a cool $4.3 billion should last 3 or 4 months! Proof that there are much better uses of taxpayer funds than subsidizing college or repairing bridges!
Trail Camera: Based on the bait/material on the ground, I'd expect that trail camera was put in place to capture pictures of wildlife. An interesting question would be who put the camera there, a poacher or a wildlife scientist?
Market based capitalism: Coal is now so cheep, and predicted to stay so, that South Korea and Japan will be adding dozens of large coal fired plants. Korea in particular taxes coal imports at 1/3 the rate of natural gas. Fracking technology has actually driven demand for coal back up while depressing demand for solar, wind, and even hydroelectric.
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