Why the world is choking on
debt: Nouriel Roubini - (www.cnbc.com) Like
individuals, corporations, and other private firms that rely on bankruptcy
procedures to reduce an excessive debt burden, countries sometimes need orderly
debt restructuring or reduction. But the ongoing legal saga of Argentina's
fight with holdout creditors shows that the international system for orderly
sovereign-debt restructuring may be broken. Individuals, firms, or governments
may end up with too much debt because of bad luck, bad decisions, or a
combination of the two. If you get a mortgage but then lose your job, you have
bad luck. If your debt becomes unsustainable because you borrowed too much to
take long vacations or buy expensive appliances, your bad behavior is to blame.
The same applies to corporate firms: some have bad luck and their business
plans fail, while others borrow too much to pay their mediocre managers
excessively.
The last time the market did this, serious
problems ensued - (finance.yahoo.com) According
to data from Thomson Reuters, the mergers and acquisitions market saw nearly
$1.77 trillion in deals announced for the first half of this year. And, the
second quarter of 2014 saw over $1 trillion in deals announced, the highest
since the second quarter of 2007. And, we all know what happened after that.
But, does that mean we’ll see a repeat of seven years ago? “If you look back in
history, big merger waves definitely precede precipitous drops in the equity
market,” said Gina Sanchez, founder of Chantico Global. “As you have
extraordinary valuations in your own stock, you can use it to buy up all sorts
of things. So, there’s a reason these tend to happen at the top.” But trying to
use M&A as a signal comes with its own peril, warns Sanchez, a CNBC
contributor. “The problem with M&A as a timing tool is it’s not
particularly precise,” she said. “It could go on for a while before it actually
proceeds that drop. So, it’s not terribly exact. But what we do know is, when
we see enormous waves of M&A, you can expect a precipitous decline to come
after that.”
Gas
Prices Wallop Wallets - (online.wsj.com) As
Americans drive to barbecues and the beach in coming days, they will be paying
more for gas than on any Independence Day weekend since the record highs of
2008. A gallon of unleaded gasoline cost an average of $3.67 Wednesday, almost
20 cents above last year's price, according to automobile club AAA. In
California, drivers have been paying well over $4 a gallon for weeks. Prices at
the pump are tracking a sharp rise in oil prices over the past month, after
Islamist militants took control of several cities in Iraq. Investors and
traders have worried that the spreading insurgency poses a threat to the
country's oil production. Oil prices have given up some of their gains in
recent days, but it will take some time for those declines to be reflected in
the cost of gasoline.
Pimco's Gross: Bank loans
starting to look 'bubbly' - (www.cnbc.com) Pimco
founder and CIO, Bill Gross said he sees bubbly pockets in the market. "There's
bubbly aspects in terms of the terms and conditions, for instance, in terms of
bank loans. There can be tight conditions which restrict a company in terms of
their ability to lever going forward," Gross said in an interview on
CNBC Wednesday. "...There can be easy types of covenants and restrictions
and certainly the Fed see's, and we see as well, that over the past 12 to 18
months that those standards have been eased and perhaps are a little bit
bubbly," he explained. In terms of spreads themselves and the prices of
risk assets, Gross said he sees them on a "normal level if the new neutral
stays low at 2 percent." Pimco Total Return fund posted $4.5 billion in net outflows for
June, logging its 14th straight month of investor withdrawals despite an
improving performance, according to data from Morningstar data.
Gov. Christie:
Fix pension system or it will eat us alive - (www.news.yahoo.com) From
revenue shortfalls to a pinched pension system, the fiscal woes facing the
state of New Jersey are so serious that if not dealt with swiftly, it could
"eat us alive," Gov. Chris
Christie told
CNBC on Tuesday. The Republican governor appeared on "Squawk Box" the day after signing the state's
budget, in which he vetoed more than $1 billion in tax increases that he said
would only serve to drive families and businesses out of the state. "I have
a constitutional requirement to balance the budget and I have a state that's
already high-taxed and I'm not going to raise taxes on the people in the state
of New Jersey and drive more people out," said Christie.
German
private sector expands at slowest pace in eight months in June: PMI - (www.reuters.com)
Euro zone business growth slows in June as French activity drops: PMI - (www.reuters.com)
Euro zone business growth slows in June as French activity drops: PMI - (www.reuters.com)
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