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November 2008

Tonight: the Ascent of Money – Monday 24th November, 8pm Channel 4

This second episode of historian Niall Ferguson’s series on the story of money and finance, The Ascent of Money, is probably worth a look.  It’s apparently going to cover the development and importance of bond markets, and although it includes an interview with a minor US bond fund manager rather than one of your friends at M&G, it will be interesting. 

Meanwhile it’s time for a quick competit…

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Driven to Bankruptcy?

I’m sure it won’t have escaped most people’s attention that the big American car makers are suffering at the moment – sales by the big three, GM, Ford and Chrysler were down 23% last month. Both GM and Ford announced last week that they have been spending their cash reserves at a hefty pace, and GM has said that it could run out of operating cash as soon as the end of the year.

This has lead so…

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Turning Japanese I think we're turning Japanese I really think so

Yesterday it was announced that UK CPI inflation for the month of October was minus 0.2%.  The annualised rate of inflation dropped from +5.2% to +4.5%, the biggest year on year drop in UK CPI since April 1992. Inflation expectations have plummeted.  The 5 year breakeven inflation rate, i.e. the rate of inflation priced in by the UK index-linked bond market, is now -0.1%.  In other words, the U…

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Explaining the current unprecedented credit spreads: "It’s the economy, stupid"

Is it? Well kind of. Credit spreads (ie the excess yields on corporate bonds over government bonds) are very closely correlated to the strength of the underlying economy – when times are good, investors demand a small risk premium, and when things turn nasty, investors demand a much bigger risk premium. Right now, credit spreads are at almost unprecedented levels – see the chart in Richard’s re…

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Rates – how low can they go?

We talked about the possibility of Japanese-style zero interest rate policy (ZIRP) heading to the western economies in a recent blog. Today we had an unexpectedly large rate cut from the Bank of England, with the policy rate hitting 3%, its lowest level since 1955, when Winston Churchill was Prime Minister. In this link to a 3 minute video I recorded this afternoon you can look into my wild, st…

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