On the one hand, we believe there will be more US interest rate cuts than the market is pricing in (the market’s anticipating about two 0.25% rate cuts by this time next year, and no more thereafter). We’ve posted a number of comments explaining …Read the article
The Bank of England’s controversial decision to bail out Northern Rock depositors, which was probably necessary to prevent a UK banking sector collapse, has done very little to halt the slide in Northern Rock’s equity price and for good reason. The Bank of England has been clear that its rescue is only a temporary measure, and Northern Rock’s potential to write new business and take deposits i…Read the article
Alongside Greenspan’s book, here’s something else that I don’t want for Christmas. Pre-order now at Toys R Us. Click image to enlarge.
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Greenspan’s interview in today’s Daily Telegraph can be read here. It’s pretty bearish on the problems in the financial markets (and he thinks the problems will be greater in the UK than in the US, thanks to the number of variable rate loans), and also on the prospects for long term inflation, which could stabilise around 5%. Putting aside the issue of who created many of the problems in the fi…Read the article
Former MPC member Willem Buiter has laid into the bail out of Northern Rock by the Bank of England, just a couple of days after it talked tough about the importance of not supporting lenders who made risky decisions.
“Following the bail out of Northern Rock, I can only conclude that the Bank of England is a paper tiger. It talks the ‘no bail out’ talk, but it does not walk the talk. It does not…Read the article
I am told that 75% of City traders hadn’t even started in the world of work at the time of the LTCM crisis (less than ten years ago in 1998). I don’t know if this is true or not, but it does put this (real, and not said ironically) quote from the senior swaps trader at a top 5 investment bank into perspective:
“In the 3 1/2 years I’ve been trading these markets, I’ve never seen it so bad”.
Ho …Read the article
The Council of Mortgage Lenders has released this chart on the left. It shows that UK mortgage payments as a percentage of income is steadily rising, and now stands at nearly 17%, the highest it’s been since Q3 1992. However, this is still a way away from the peak of over 25% towards the end of the 1980s, just ahead of the property crash and recession. As we’ve noted though, with 2 million fixe…Read the article
Here is a link to our Credit Crisis teleconference replay. It’s approximately 20 minutes long, with slides, and there’s a further 10 minutes of Q&A afterwards. We cover the problems in the global money markets, the falling US housing market, and the prospects for corporate bonds and high yield if there is a recession or significant global slowdown.Read the article
Here’s a bit of proof of our assertion that the bond market is better at forecasting recessions than the Wall Street economists. Apparently in March 2001, the first month of the last US recession, 95% of US economists were predicting that there wouldn’t be one, and the average forecast growth rates for Q2 and Q3 were 2.2% and 2.3%. This New York Times article suggests that because recessions ar…Read the article
We’ve mentioned the crystal ball-like qualities of the US yield curve a couple of times on this blog. In May Jim showed that it can be a good predictor of recession (read article here), and the San Francisco Fed has recently published this interesting piece that adds weight to the argument.
There is some statistical analysis within the article, but in short it concludes that the yield curve is …Read the article