Comments on: The Paradox of Deficits http://www.ritholtz.com/blog/2009/05/the-paradox-of-deficits/ Macro Perspective on the Capital Markets, Economy, Geopolitics, Technology, and Digital Media Tue, 14 Feb 2012 17:38:10 +0000 hourly 1 http://wordpress.org/?v=3.0.5 By: Genko Shipping - Coming Out of Hibernation | ZachStocks http://www.ritholtz.com/blog/2009/05/the-paradox-of-deficits/comment-page-1/#comment-178582 Genko Shipping - Coming Out of Hibernation | ZachStocks Tue, 02 Jun 2009 13:57:50 +0000 http://www.ritholtz.com/blog/?p=27331#comment-178582 [...] This is important because Genco is taking delivery of three additional ships in the second quarter which will require the company to pull a significant portion of the $191 million undrawn LOC.  With delivery of these three new ships the company will have a fleet of 35 ships well diversified between Capesize, Panamax, Supramax, Handymax and Handysize vessels.  The diversification is important because it allows the company to compete on different contracts where customers may need large ships for bulk transport, or smaller vessels to navigate particular straits. Other Articles of Interest Staying Afloat – A Primer on the Shipping Industry Risk and Reward – Lessons From the Last 18 Months Neptune Orient Lines Raises Capital Ritholtz: The Paradox of Deficits  [...] [...] This is important because Genco is taking delivery of three additional ships in the second quarter which will require the company to pull a significant portion of the $191 million undrawn LOC.  With delivery of these three new ships the company will have a fleet of 35 ships well diversified between Capesize, Panamax, Supramax, Handymax and Handysize vessels.  The diversification is important because it allows the company to compete on different contracts where customers may need large ships for bulk transport, or smaller vessels to navigate particular straits. Other Articles of Interest Staying Afloat – A Primer on the Shipping Industry Risk and Reward – Lessons From the Last 18 Months Neptune Orient Lines Raises Capital Ritholtz: The Paradox of Deficits  [...]

]]> By: Start of the Great Commodity Bull Market? Not Yet | Forex Review http://www.ritholtz.com/blog/2009/05/the-paradox-of-deficits/comment-page-1/#comment-176004 Start of the Great Commodity Bull Market? Not Yet | Forex Review Tue, 26 May 2009 18:25:55 +0000 http://www.ritholtz.com/blog/?p=27331#comment-176004 [...] John Mauldin observed, the European banking system is a [...] [...] John Mauldin observed, the European banking system is a [...]

]]> By: drollere http://www.ritholtz.com/blog/2009/05/the-paradox-of-deficits/comment-page-1/#comment-175468 drollere Sun, 24 May 2009 15:13:10 +0000 http://www.ritholtz.com/blog/?p=27331#comment-175468 very nice factual overview. not a shred of graphical description ("technical analysis") in it. some comments: * the "ugly" trade chart compares trade during the worst economic collapse in 80 years with two decades of the largest economic, monetary and resource bubble in human history. let's push the chart back to 1950 at least, before we wet our garments. * the "risk weighting" of assets is i think a mechanism out of the basle accords. if so it may (must?) apply to u.s. debt, at least in the international entanglement of derivatives -- true or not? and, while canada does have a leverage cap (20:1), the usa did (does) not, at least in regulatory practice. remember bear, lehman and aig? * interest on 10 year bonds moving from 2.5% to 3.5%? i agree with steve barry: that is surely a very modest risk premium rise. you've just painted the picture of spain falling into a deflationary black hole, and other countries in europe (especially ireland and eastern europe) may follow. of course, "can't finance the debt" is a specific form of risk. the point is, we're not at the point where investors can say that is the single most significant risk to their investment in the usa. * china's renminbi trade agreements are a hedge against dollar risk, yes. they are also part of the chinese strategy to turn a bigger gear in the global economic structure. money influence is power. all the forecast analyses i have read have the following subtext: "the problem is the big hole. once (if) we fix the big hole, then we'll have the costs of fixing the big hole. once we pay off the costs, we'll be ok again." the flaw here is that the big hole was caused by a bad mechanism -- the *carbon debt economy*. (or the "we make it cheap and buy lots of your bonds" economy.) we have been drawing down 4 billion years of biogeologic reserves and 20 years of cheap treasury reserves. we cannot fix and go back to the gushing carbon debt economy of cheap oil and cheap money. we might be able to move laterally, create a sustainable *green savings economy*, and thereby produce new economic growth and structural economic change at the same time. i haven't seen either the roadmap or the social costs of that scenario laid out. meantime, we are trying to fix something that is definitively broken. that makes even the pessimists too optimistic. very nice factual overview. not a shred of graphical description (“technical analysis”) in it. some comments:

* the “ugly” trade chart compares trade during the worst economic collapse in 80 years with two decades of the largest economic, monetary and resource bubble in human history. let’s push the chart back to 1950 at least, before we wet our garments.

* the “risk weighting” of assets is i think a mechanism out of the basle accords. if so it may (must?) apply to u.s. debt, at least in the international entanglement of derivatives — true or not? and, while canada does have a leverage cap (20:1), the usa did (does) not, at least in regulatory practice. remember bear, lehman and aig?

* interest on 10 year bonds moving from 2.5% to 3.5%? i agree with steve barry: that is surely a very modest risk premium rise. you’ve just painted the picture of spain falling into a deflationary black hole, and other countries in europe (especially ireland and eastern europe) may follow. of course, “can’t finance the debt” is a specific form of risk. the point is, we’re not at the point where investors can say that is the single most significant risk to their investment in the usa.

* china’s renminbi trade agreements are a hedge against dollar risk, yes. they are also part of the chinese strategy to turn a bigger gear in the global economic structure. money influence is power.

all the forecast analyses i have read have the following subtext: “the problem is the big hole. once (if) we fix the big hole, then we’ll have the costs of fixing the big hole. once we pay off the costs, we’ll be ok again.” the flaw here is that the big hole was caused by a bad mechanism — the *carbon debt economy*. (or the “we make it cheap and buy lots of your bonds” economy.) we have been drawing down 4 billion years of biogeologic reserves and 20 years of cheap treasury reserves. we cannot fix and go back to the gushing carbon debt economy of cheap oil and cheap money.

we might be able to move laterally, create a sustainable *green savings economy*, and thereby produce new economic growth and structural economic change at the same time. i haven’t seen either the roadmap or the social costs of that scenario laid out. meantime, we are trying to fix something that is definitively broken. that makes even the pessimists too optimistic.

]]> By: Bruce in Tn http://www.ritholtz.com/blog/2009/05/the-paradox-of-deficits/comment-page-1/#comment-175467 Bruce in Tn Sun, 24 May 2009 15:12:49 +0000 http://www.ritholtz.com/blog/?p=27331#comment-175467 John, if you really wanted to do some good you could manage to get these questions asked to Barney Frank or Ben Bernanke. In this site, you are "preaching to the choir" for most of us, who have asked the same questions and come to the same conclusions since September of last year... John, if you really wanted to do some good you could manage to get these questions asked to Barney Frank or Ben Bernanke. In this site, you are “preaching to the choir” for most of us, who have asked the same questions and come to the same conclusions since September of last year…

]]> By: Bruce in Tn http://www.ritholtz.com/blog/2009/05/the-paradox-of-deficits/comment-page-1/#comment-175460 Bruce in Tn Sun, 24 May 2009 14:59:30 +0000 http://www.ritholtz.com/blog/?p=27331#comment-175460 "All this should be massively deflationary. Interest rates should be falling or at least not rising. But a funny thing is happening. In the past two months, the yield on the ten-year bond has risen by 1%. It has moved 0.38% or almost “4 big handles” in just two weeks. Look at the chart below. What is happening?" It is massively deflationary...but as the Economist has written...local liquidity doesn't matter, it is a function of global liquidity... What is happening? Investors are voting that other nations' debt may be more reliable than ours...end of explanation.. ...You are welcome. “All this should be massively deflationary. Interest
rates should be falling or at least not rising. But a funny thing is happening.
In the past two months, the yield on the ten-year bond has risen by 1%. It has
moved 0.38% or almost “4 big handles” in just two weeks. Look at the chart
below. What is happening?”

It is massively deflationary…but as the Economist has written…local liquidity doesn’t matter, it is a function of global liquidity…

What is happening? Investors are voting that other nations’ debt may be more reliable than ours…end of explanation..

…You are welcome.

]]> By: How the Common Man Sees It http://www.ritholtz.com/blog/2009/05/the-paradox-of-deficits/comment-page-1/#comment-175436 How the Common Man Sees It Sun, 24 May 2009 14:10:13 +0000 http://www.ritholtz.com/blog/?p=27331#comment-175436 Great article. It is about time the bond market took away the credit card from these idiots that are running things. I guess they never thought about who they were going to sell all this debt to. People with money are too smart to give it the the John Laws in the US government and the lender of last resort, China, is getting smarter by the day. I guess they can still sell the debt to the fed. Good luck with that Great article. It is about time the bond market took away the credit card from these idiots that are running things.

I guess they never thought about who they were going to sell all this debt to. People with money are too smart to give it the the John Laws in the US government and the lender of last resort, China, is getting smarter by the day. I guess they can still sell the debt to the fed. Good luck with that

]]> By: Steve Barry http://www.ritholtz.com/blog/2009/05/the-paradox-of-deficits/comment-page-1/#comment-175375 Steve Barry Sun, 24 May 2009 06:19:25 +0000 http://www.ritholtz.com/blog/?p=27331#comment-175375 Maybe I'm missing something, as it seems so simple to me...yields are rising not because inflation is coming, but because credit risk is rising. Bonds currently rated AAA or BBB for example, will not keep those ratings...some will be downgraded right to junk, sending yields soaring. Maybe I’m missing something, as it seems so simple to me…yields are rising not because inflation is coming, but because credit risk is rising. Bonds currently rated AAA or BBB for example, will not keep those ratings…some will be downgraded right to junk, sending yields soaring.

]]> By: Cursive http://www.ritholtz.com/blog/2009/05/the-paradox-of-deficits/comment-page-1/#comment-175367 Cursive Sun, 24 May 2009 04:55:42 +0000 http://www.ritholtz.com/blog/?p=27331#comment-175367 Excellent read, as always. I get that Mr. Mauldin is saying that the bond markets are now expecting inflation becuase of the unprecedented need for governments to raise cash to finance the deficient spending, but is he also suggesting that those bond markets are right? It is possible that the bond markets could get it wrong and we still have deflation. It would be interesting to hear his views on that. Excellent read, as always. I get that Mr. Mauldin is saying that the bond markets are now expecting inflation becuase of the unprecedented need for governments to raise cash to finance the deficient spending, but is he also suggesting that those bond markets are right? It is possible that the bond markets could get it wrong and we still have deflation. It would be interesting to hear his views on that.

]]> By: SPX target within 2-3 years « The Un-Colon Club http://www.ritholtz.com/blog/2009/05/the-paradox-of-deficits/comment-page-1/#comment-175358 SPX target within 2-3 years « The Un-Colon Club Sun, 24 May 2009 03:52:33 +0000 http://www.ritholtz.com/blog/?p=27331#comment-175358 [...] SPX target within 2-3 years By uncolonclub good article [...] [...] SPX target within 2-3 years By uncolonclub good article [...]

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