Posts filed under “Credit”

The Credit Window is Now Closed

The Dow is off 395 points as I type this. There will be some short covering shortly, and a rally attempt. But what I want to address is the change that has taken place:

What has changed? What is different today than yesterday? Are the prospects of the economy and/or corporate profits so different today than they were merely a week ago?

What has changed is Credit: Risk appetite for anything less than AAA — and that includes the ABX stretched definition of AAA (see WTF is going on in the ABX Markets?) — has waned considerably.

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My favorite market metaphor is the multi-engined plane. Each propeller-driven engine represents a different source of power, and each works to propel the markets higher and higher. Over the past few years, this plane has climbed on a variety of sources of "elevation."

What have been the engines?

Share Buybacks
M&A
Liquidity
Reasonable Valuations
Private Equity/LBOs
High Corporate Profits
Consumer Spending

How are these factors working at present?

-Valuation: We have been more or less fairly valued for some time now.
-M&A activity will likely soften, due to both psychology and unavailability of leverage for cash.
-Corporate profits are still expanding, albeit at a much slower rate
-Consumer spending has been pinched, and retail sales are slowing

Two of the biggest drivers — Share Buybacks and LBOs — are now kaput. What is occurring today is a full blown repricing of the liquidity spigot slowly turning off.

Back to work.

Category: Credit, Derivatives, Markets, Psychology, Trading

Category: Credit, Economy, Markets, Psychology, Real Estate, Valuation

The Great Credit Contraction of 2007

Category: Credit, Derivatives, Economy, Markets, Real Estate

What’s in Your Money Market ?

Category: Credit, Derivatives, Fixed Income/Interest Rates, Investing

Brief Foreclosure History & Mortgage Delinquency Maps

Category: Credit, Derivatives, Hedge Funds, Real Estate

“Right now things are starting to come unglued”

Category: Credit, Derivatives, Markets, Psychology, Real Estate

Borrowing & Spending

Category: Consumer Spending, Credit, Psychology, Real Estate, Retail

Underwater ARMs ?

Category: Credit, Data Analysis, Real Estate

10 Questions About CDOs

Category: Credit, Derivatives, Hedge Funds, Investing, Psychology

CDO Hedge Funds = Enron ?

Category: Credit, Data Analysis, Derivatives, Finance, Hedge Funds, Markets, Psychology