Tuesday , June 2 2020
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Tag Archives: Credit markets

Wall Street’s Useful Idiot: Financial Times Shills for CLOs….as Fed Hasn’t Bailed Them Out

It’s not a popular position to point out that a particular financial risk is overblown. But when everyone in Corporate American and investor-land is in “Where’s my bailout?” mode, the usual motivations are reversed. Normally, “Nothing to see here, move along” is the default position when the great unwashed public worries about too much leverage, opacity, and tricky practices. But when central banks are doling out trillions, sounding alarms, whether warranted or not, is the way to get someone...

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US Commercial Real Estate Prices Plunged in April, Mall Prices Collapsed

Yves here. Distress in commercial real estate is important not just in and of itself but also for its impact on long-term investors who’ve been active in these properties, such as pension funds and life insurers. By Wolf Richter.  Originally published at Wolf Street Before the coronavirus, some segments of commercial real estate (CRE) were red hot, others were hanging in there or declining, and one sector, malls, has been in deep trouble since 2016, with prices plunging. Then came the...

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Coronavirus To Decimate Colleges and Universities

“Decimate” might be too charitable a forecast for American higher educational institutions, since the word originated with the Roman army practice of killing one man in ten. Coronavirus is hitting pretty much all of the bad aspects of their business models at once. Let’s list them: Dependence on/preference for foreign students, often not for their accomplishments but for their ability to pay full and even premium fees. Chinese students accounted for one-third of the total. Their enrollment...

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Don’t Do It Again! The Swedish Experience With Negative Central Bank Rates in 2015-2019

Yves here. It bears repeating that the Fed is not at all keen about negative interest rates. Indeed, it wasn’t even keen about super low interest rates once it realized they had been unproductive to counter-productive but given the weak recovery, the central bank also found it hard to back out of that corner. The Fed has even gone as far as grumbling about the ECB’s unseemly willingness to engage in negative interest rates. Needless to say, the Swedish experience (and its central bank’s...

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Modigliani Meets Minsky: Rising Inequality and U.S. Household Debt Since 1950

Yves here. This short piece looks at some of the intuitions about the relationship between rising household debt levels and increasing inequality. And they sure do look to be connected! By Alina Bartscher, University of Bonn, Moritz Kuhn, Professor, Department of Economics, University of Bonn and Moritz Schularick, Professor of Economics, University of Bonn. Originally published at the Institute for New Economic Thinking website American household debt has skyrocketed in the past seven...

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The Federal Reserve’s Coronavirus Crisis Actions, Explained (Part 6)

Yves here. We’ve been so pre-occupied with trying to understand coronavirus and its progress that we’ve wound up neglecting important topics that would normally be at the heart of our beat, such as “What is the Federal Reserve up to?” with its many big ticket programs. Fortunately, Nathan Tankus has been all over many of the technical aspects of the coronavirus rescue initiatives, such as they are. By Nathan Tankus. Originally published at Notes on the Crises I apologize for the long delay in...

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Fed Drastically Slashed Helicopter Money for Wall Street. QE Down 86% From Peak Week in March

Yves here. The fact that the Fed isn’t giving financiers as much in the way of new juice doesn’t change the fact that it threw open the floodgates last month. By Wolf Richter, editor at Wolf Street. Originally published at Wolf Street Total assets on the Fed’s balance sheet rose by only $83 billion during the week ending April 29, to $6.656 trillion. That $83 billion was the smallest weekly increase since this show started on March 15, and down by 86% from peak-bailout in the week ended March...

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More Public Pension Fund Pain: LACERS Reports Hit to Liquidity from Private Equity Capital Calls; Are Fund Managers Exploiting the Dumb Money Yet Again?

In case you managed to miss it, public pension funds are under stress, to the degree that Mitch McConnell bothered kicking them while they were down. And as we’ll show shortly, public pension funds are facing more pain due to private equity funds making them cough up money to meet capital calls. Public pension funds tight on available cash to pay benefits may wind up selling assets at fire-sale prices, as CalPERS did in 2009. But any pension fund that winds up making private-equity-induced...

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Why this volatility isn’t unprecedented

I have heard comments from veteran technical analysts who have become bewildered by the market’s action. The word “unprecedented” is often used. I beg to differ. The violence of the sell-off, and subsequent rebound is not an unprecedented event. Recall the NASDAQ top of 2000. The NASDAQ 100 fell -39.8% from its March 2000 high, and rebounded 40.1% to its 61.8% Fibonacci retracement level in just four months. The index proceeded to lose -49.7% in that year, and ultimately -80.8% at the 2002...

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Making sense of the oil crash

Mid-week market update: How should investors interpret the crash in oil prices and its effect on the stock market? The most simplistic way of looking at it is to observe that stock and oil prices have diverged. Either oil has to rally hard, or stocks have to fall down – a lot.  That’s a basic tactical view. While it may be useful for traders, correlation isn’t causation. These gaps in performance can take a lot longer than anyone expects to close. It certainly isn’t the entire...

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