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Everyone Is Missing The 'Quiet Crash' In Mortgage Bonds – (www.businessinsider.com) On CNBC just now, DoubleLine Capital bond manager Jeffrey Gundlach says this is a "bear-market rally" in stocks right now, and that everyone is missing the quiet story: The big crash in mortgage credit. Actually he called it a "quiet crash," something that's persisted even as other forms of credit and assets have rallied in recent days. Specifically, he referred to the PrimeX index, a synthetic index of mortgage bonds that are specifically NOT subprime, which has been been tanking lately. For a good overview of what PrimeEx is, see FT Alphaville's Tracy Alloway here, or click on the image. Generally, Gundlach remains bearish, and says to short risk amid this latest bout of euphoria. The next 5 points in credit will be down, not up, and you know it's a bear market rally, because the rally feels so good.
Deutsche to do everything to avoid forced recapitalization: CEO - (www.reuters.com) Germany's Deutsche Bank (DBKGn.DE) will do all it can to avoid a forced recapitalization, its Chief Executive Josef Ackermann said on Thursday, adding the bank had enough funds of its own to prepare for a crisis. At a conference in the German capital, Ackermann also said the bank's obligation to hold Greek bonds had cost it 400 million euros this year. Germany's highest profile banker was speaking as fears grow that theeuro zone debt crisis could spill over into the banking sector.
Protesters to ‘Occupy’ London Stock Exchange - (www.bloomberg.com) Protesters are preparing to set up camp outside the London Stock Exchange, expanding Occupy Wall Street demonstrations that began in New York. About 4,000 people have signaled their intent to attend a peaceful demonstration that will start at noon on Oct. 15, Kai Wargalla, one of the organizers of Occupy London Stock Exchange, said in a telephone interview yesterday. The group plans to mass in Paternoster Square, close to the London offices of both Bank of America Corp. in King Edward Street and Goldman Sachs Group Inc. (GS) on Fleet Street. Occupy Wall Street rallies started last month in New York’s financial district, where people have been staying in Lower Manhattan’s Zuccotti Park to protest inequality and advocate higher taxes for the wealthy. Citigroup Inc. (C) Chief Executive Officer Vikram Pandit, 54, said he would be happy to talk with participants, saying their sentiments are “completely understandable.”
Junk bonds priced for renewed downturn - (www.ft.com) Investors have become so perturbed by the uncertain economic outlook that they have fled junk bonds, leaving the $1,000bn market priced as if a deep and painful recession lies ahead. Despite some improvement in sentiment in recent weeks, US junk bond yields, which rise as prices fall, are still trading at about 9.6 per cent, according to a Bank of America Merrill Lynch index. This marks a complete turnround from May, when yields touched an all-time low of 6.64 per cent. Judged by the 800-900 basis point premium in recent weeks, the highest spread paid above Treasuries in two years, the market is bracing for outsized risk. Yet high yield debt is one of the most volatile of asset classes, as companies move in and out of financial health. And the market is far fitter than it was two years ago, when bond prices last suggested such deep levels of pessimism. Even so, taken at face value, the market is predicting a deep recession. Assuming that in the event of default a high yield bond holder will get a typical 40 per cent of their money back, high yield spreads now imply about an 8 per cent default rate for junk bonds, almost double the historic average.
Fitch Sends Out A Huge Warning On Banks, Threatening To Downgrade Practically All The World's Biggest Firms - (www.businessinsider.com) Big noise out of Fitch this evening, as the ratings agency just threatened downgrades across the global banking system. Here's the warning announcement: More important, perhaps, than the specific ratings is the broader commentary from Fitch: Fitch Ratings-New York-13 October 2011: In conjunction with a broad assessment of the ratings for the largest banking institutions in the world, Fitch Ratings is conducting a review of the global trading and universal banks in its rating portfolio. As part of that review, Fitch has placed the Viability Ratings (VRs) of seven and the long-term Issuer Default Ratings (IDRs) of six global trading and universal banks on Rating Watch Negative. At the same time, Fitch has placed the short-term IDRs of four of the banks on Rating Watch Negative.
German Inflation Rises More Than Estimated - (www.bloomberg.com)
China Offers Loan, Tax Help to Small Companies as Wenzhou Risks Spreading - (www.bloomberg.com)
Berlusconi to Address Parliament After Losing Budget Vote - (www.bloomberg.com)
China Exports Slow on ‘Severe Challenges’ - (www.bloomberg.com)
South Korea Holds Rates, BOJ Members Discuss Stimulus as Global Risks Rise - (www.bloomberg.com)
IMF Says Europe Crisis Escalation Poses Severe Risk to Asia - (www.bloomberg.com)
China Puts Light on Shadow Loans - (online.wsj.com)
Initial Jobless Claims in U.S. Fell to 404,000 - (www.bloomberg.com)
Trade Deficit in Is U.S. Little Changed at Four-Month Low of $45.6 Billion - (www.bloomberg.com)
Growing Income Gap May Leave U.S. More Vulnerable to Crises - (www.bloomberg.com)
Fed Signals Next Move May Link Stimulus to Economic ‘Mileposts’ - (www.bloomberg.com)
Biggest U.S. Free-Trade Accord Since ’94 Passed - (www.bloomberg.com)
US foreclosure activity edged higher in 3Q - (finance.yahoo.com)
JPMorgan’s Third-Quarter Profit Drops on Investment-Bank Slump - (www.bloomberg.com)
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