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From Bruce Krasting: In February, when Ben Bernanke gave his report to Congress, he spoke of his concern about “excessive risk taking.” On May 10 he repeated his warning: … very low interest rates, if maintained for a considerable time, could impair financial stability. For example, portfolio managers dissatisfied with low returns may “reach for yield” by taking on more credit risk, duration risk, or leverage. Spain’s sovereign risk premium shot to a euro-era record Tuesday as Madrid announced new bonds to finance debt-struck regions and as banks scrambled to clean up bad loans. The debt premium — the extra return investors demand to hold Spanish bonds over their safer German counterparts — leapt to a euro-era record of 5.16 percentage points. Markets buckled on concerns over the debt load in powerful regional governments and on signs of [...] Zero Hedge As the S&P 500 reaches new multi-year highs and VIX touches multi-year lows, there is one rather large and risk-appetite-proxying market out there that is not as excited. The high-yield bond market has seen record in-flows dropping off recently and for the last four-to-six weeks high-yield spreads, yields, and bond prices have been very flat as stocks have surged ahead. Despite US earnings yields at near-record highs relative to high-yield [...] While Obama may or may not be on the way to winning his reelection, courtesy of a GOP field that is, to say the least, limited, and where the only worthy candidate is more ostracized by the right than even anyone on the left, the bottom line is that whoever wins the presidency, it will matter preciselydidley squat. As the US debt clock shows, fast forwarding 4 years, or to February 2016, [...] Private equity leveraged buyouts (P.E. LBOs) typically put up 10% of their own collateral (although Romney would sometimes only put up 5% to 6%) with the remaining 90% from bank loans taken out against the buyout target company. This loads the company with extreme amounts of debt, which greatly reduces their taxes due to the greater tax deductibility from debt interest payments. (Equity dividends are always taxed higher than debt [...] 1) Italy Sells $10.77 Billion in Bonds as Borrowing Costs Rise “Italy sold 7.9 billion euros ($10.77 billion) in bonds, less than the maximum target, as borrowing costs rose amid contagion from Europe’s debt crisis. The Rome-based Treasury sold 3.14 billion euros of bonds due in 2014 to yield 4.68 percent, compared with a yield of 3.87 percent at the last auction on Aug. 30. Demand was 1.36 [...] by ZH In light of another fraud allegation against China Biotics which will likely soon join the Nasdaq trading halt page, we decided to take a quick look at the Nasdaq trading halts page. To our complete lack of surprise, Chinese fraud dominates with an iron fist: of 19 halted stocks (GFC has three classes of securities halted), 15 of the name are Chinese. Of these [...] From the launch press release: The BPP is proud to announce the launch of PriceStats, a start-up based in Cambridge MA with the mission of becoming a leading source of daily inflation statistics around the world. PriceStats will allow the BPP to focus on research and continue innovating in the field of real-time price statistics. Our research team will have access to a greater amount of data than ever before, [...] by ZH The latest comes from the WSJ which informs that based on “people close to the matter” Soros and Burbank are now dumping their gold and silver: “George Soros’s big hedge fund, a firm operated by high-profile investor John Burbank and some other leading firms have been selling gold and silver, according to people close to the matter, after furiously accumulating precious metals for [...] By Eric Savitz Seagate (STX) shares late yesterday posted September quarter profits that were well short of expectations, triggering disappointed commentary from the Street, including a couple of downgrades. But the real focus for Seagate is the possibility that the company might be taken private – and some observers see the company’s decision not to provide December quarter guidance as a sign that something could happen soon. Needham analyst [...] by ZH This is precisely the point of Nicholas Colas’ latest essay, in which he observes that “HFT exists among all market capitalizations, from micro cap to the largest of names in the S&P 500. The smaller end of the cap spectrum, however, has far more potential growth associated with it. Somewhere among these companies sits the “next big thing†that is currently undervalued. HFT strategies [...] |
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